In one of the biggest acquisitions ever in the lighting industry, Vari-Lite International Inc. has sold the assets of its Vari*Lite® products manufacturing and sales division to Genlyte Thomas Group LLC (GTG), the manufacturer of lighting fixtures and controls for commercial, industrial, and residential markets.
The sale included the Vari*Lite family of products as well as all sales, manufacturing, and engineering operations associated with this division. GTG also acquired the Vari*Lite trademark and all patents associated with Vari*Lite products. The purchase price, which will be finalized within 30 days, is estimated to be $10.5-11.5 million, which will result in a loss of approximately $4-5 million. Genlyte is to continue building and selling Vari*Lite product, with Rusty Brutsché, the company's CEO, leaving to run VLPS, Vari-Lite's rental division, as a separate entity.
Some in the lighting industry were shocked to hear about the breakup of Vari-Lite, the company that pioneered automated lighting. However, in interviews with Brutsché and Steve Carson, vice president and general manager of Genlyte's controls division, the sale emerges as an informed attempt at solving the problems that have plagued Vari-Lite in recent years. In fact, the new business model created by the deal is one that many lighting companies will be scrutinizing closely as they map out their own futures.
The basic problem facing Vari-Lite, says Brutsché, was deciding “which business it was going to be in. We prefer the rental business. We felt the manufacturing side of things needed to be part of a big organization.” A rental operation for most of its existence, Vari-Lite added a sales division, with a new line of for-sale products, in the last few years. While new units such as the VL1000™ and the new Series 3000™ won acclaim, Brutsché says that long-term financial success proved elusive. “The market changed and we were forced to begin selling,” he says, then adds, “We're just not manufacturers.”
The key to success, Brutsché continues, is finding a structure that makes manufacturing cost-effective. In the old business model, Vari-Lite built equipment, then rented it, making money many times over on each unit. In the manufacturing model, it is necessary to produce and sell far larger quantities of product, an effort that requires more capital and other resources. “It's been 21 years since we started with automated lighting,” he says. “We've reached the point where [the technology is] everywhere. It's time for companies with the expertise to make it more affordable. The name of the game is, who is going to produce the best equipment at the lowest price? If you're building 500 lights a year, you can't get your costs down.”
Enter Genlyte Thomas Group. The deal, which has been in the works for a few months, came out after the companies' collaboration on the VL1000 fixture, which has a dimmer by Entertainment Technology, the dimming specialist that Genlyte purchased from Rosco last year. Genlyte Thomas, like Vari-Lite, is based in Texas, and, as they began working together, Brutsché sensed that the two companies were simpatico. “Genlyte is one of the first big companies to enter the entertainment business,” he notes, adding, “The Entertainment Technology product is pretty impressive.” He also points out that Entertainment Technology has thrived under Genlyte, taking ET's IPS dimmer technology and re-engineering it for maximum savings.
Clearly, Brutsché hopes the same will happen with Vari-Lite, and Steve Carson echoes these feelings. “We see tremendous commercial potential for these products,” he says. “The entertainment lighting and control market was one of the few areas that Genlyte Thomas did not participate in,” he says. “It was a large hole in our package. Vari-Lite is a brand that clearly matches the profile that Genlyte Thomas prefers to have: a company that is number one or two in a niche market.” He adds, “Technology tends to be developed in the entertainment industry, then moves into other commercial markets. We believe automated lighting will move in that same direction.”
Meanwhile, VLPS, under Brutsché, will continue its strategy of providing high-quality equipment for rental, along with the requisite support. The company will continue to stock and support the rental-only fixtures that once made up Vari-Lite's inventory. “Part of the deal with Genlyte Thomas is they'll support all the equipment in the market,” says Brutsché. “Of course,” he adds, “we'll offer the customer whatever they want. But we're looking forward to a good relationship. We plan to be a Vari-Lite dealer in the US and their master distributor in London and Japan.”
Interestingly, Brutsché is keeping ownership of the Virtuoso™, the highly regarded control console that Vari-Lite ceased manufacturing last year. “We've retained it and we'll continue to develop it as a rental product,” he says, adding that a few engineering types, including Jim Bornhorst, will join VLPS: “We would build more Virtuosos for rental but not for sale. We do expect to build some more DX units.”
In the near term, however, Brutsché will concentrate on VLPS, establishing a new corporate office in Dallas, visiting branch offices in New York, Los Angeles, London, Tokyo, and elsewhere. “Right now, I'm still thinking about how to organize it,” he says, adding that Jerry Trojan is coming onboard as CFO. For the moment, the company will remain publicly traded.
On the Vari-Lite side, Carson says that the sales staff has been 100% retained, with Clay Powers, head of the old Vari-Lite, coming on board as general manager of the new company. (A few personnel, most notably technical marketing specialist Tom Littrell, did leave the company in the wake of the sale.) “The Vari-Lite sales channel will remain, with the dealers and distributors set up by Vari-Lite, including VLPS — theoretically, they should be our single largest customer, initially,” Carson adds. When asked about any possible synergies between Vari-Lite and Entertainment Technology, he says that Horizon, ET's PC-based controller, “will be adapted to be more friendly to moving lights,” adding, “we will continue on the Windows-based standard rather than the Mac-based Virtuoso.”
Speaking of the sale, Brutsché admits, “I've gone through the gamut of emotions. It's incredibly difficult to give up the brand you created. We created Showco, then sold that, now we're selling Vari-Lite, which we put a lot of heart and soul into. It's a bittersweet feeling, but it's invigorating, too. It's sad to see Vari-Lite go, but it's going to a good place. I have a lot of respect for Genlyte Thomas and I think they're going to do a good job with it.”