Coats Group plc wants to expand its positioning as a supplier in components.

The British multinational company inked a deal to acquire premium insole leader OrthoLite Holdings LLC. The transaction, expected to close in the fourth quarter, has an initial enterprise value of $770 million —subject to certain projections such as cost synergies by 2028 and a contingent payment of up to $10 million based on potential EBITDA (earnings before interest, taxes, depreciation and amortization) performance in 2025.

The deal would accelerate Coats’ strategy for its Coats Footwear division to become a “super tier 2” supplier in footwear components through its entrance into the fast-growing open-cell premium insole market. The acquisition include OrthoLite and Cirql.

Ortholite, founded in 1997 by Glenn Barrett, is the global market leader in open-cell foam insoles with a 36 percent market share. The segment is considered to have strong tailwinds for growth due to the open-cell technology’s superior benefits in comfort, performance and sustainability. Ortholite supplies over 500 million pairs of insoles each year to 500 brand customers. It has more than 310 co-branding agreement, as well as a strategically located global footprint of 14 production facilities.

Cirql has a newly-developed proprietary foam technology targeting the midsole market, using a biodegradable or fully recyclable offering. The technology, secured by over 80 patents, is in the early stages of commercial development, with over $30 million invested to date by its previous owners. Coats said it will further develop the commercialization plan, with the estimated costs to deliver the business to profitability deducted from the consideration paid to the seller. Ongoing costs are expected to be $1.5 million per quarter, with a break-even position expected to be achieved in 2026.

“The combination of Coats and OrthoLite is fantastic news for both companies and for the footwear industry. It brings together two global leaders in adjacent segments of the footwear components sector with a shared vision for innovation and sustainability and with unparalleled brands and customer relationships,” Coats CEO David Paja said. “We look forward to working with Glenn Barrett and the OrthoLite team, leveraging our combined strengths to reshape the future of the footwear components industry.”

“This alliance forms a powerful partnership of industry leaders to provide a platform for OrthoLite and Cirql to continue to serve our customers with the most innovative and sustainable components in the world,” Barrett said.

Coats said it plans to fund the acquisition through a combination of new debt facilities with its existing lenders and proceeds from an equity placement of up to 19.99 percent of issued shares. It said it also plans a new offering of common stock to retail investors.

The company said the acquisition will improve the overall quality of Coats’ earnings, shifting the balance towards its high growth, high margin footwear segment. Coats also said that it has identified initial joint annualized cost synergies of $20 million that it expects to achieve by 2028, with additional growth by the merged entities fueled by cross-sell opportunities and the upside potential from Cirql.

Trilantic Capital Management in July 2017 acquired its stake in OrthoLite from Blue Point Capital Partners, which made its initial investment in April 2014. Trilantic last year hired William Blair as its banker to explore a sale of the Amherst, Mass.-based insole foam manufacturer. Barrett retains a minority stake in the company. Both private equity transactions were completed in partnership with OrthoLite’s management team.