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OtterBox acquires LifeProof

San Diego’s resident device cover maker LifeProof will be gobbled up by OtterBox, one of its biggest competitors.

Fort Collins, Colo.-based OtterBox made the acquisition announcement on Wednesday during CTIA 2013 in Las Vegas, a conference that unites major players in the mobile and wireless markets.

The purchase price has not disclosed. Brian Thomas, president and CEO of Otterbox, made the announcement during his hour-long presentation.

The family-owned private company, founded in 1998, pulled in $575 million in sales last year and was named the No. 10 most promising company in America, according to Forbes.

LifeProof's patents, global partnerships, branding techniques and ability to speed past industry incumbents made it an attractive acquisition target.

“It’s one of those cases where the No. 1 brand is looking to acquire the No. 2 brand to further cement their place in the market,” said Ben Arnold, an industry analyst for The NPD Group covering consumer electronics.

LifeProof, which will retain its name, has seen sales soar since its line of weatherproof, dirtproof, snowproof and shockproof iPhone covers first hit shelves in mid-2011. Thomas said OtterBox liked LifeProof's sleek and elegant product design.

"Instead of competing with or making [LifeProof's product], I bought it," Thomas said.

LifeProof outsold OtterBox and Incase, the No. 3 brand, last year in Best Buy (NYSE: BBY) stores.

LifeProof did $99 million in phone cover sales last year, according to NPD's research.

The company has skyrocketed from just a handful to 250 employees in the past year and a half, which are expected to remain in San Diego.

Otterbox has experienced its own period of rapid growth, from under 100 employees in 2010 to over 600 in 2013.

The company recently unveiled its $100 Armor Series cases, its "toughest case ever built" that can be submerged for 30 minutes in more than 6 feet of water and survive being run over by a truck.

When Gary Rayner founded LifeProof in 2009, he pumped $500,000 into developing a first-generation product. Like many perfectionist entrepreneurs, he wasn’t happy with the first few designs.

“We had to get back to the drawing board five times to get the experience I was really looking for,” said Rayner, during an on-camera interview with The Daily Transcript this month. “Each generation was lighter, smaller, more beautiful and easier to use. We wanted to get the experience right before releasing it to the market.”

Fast forward to the present, the product is sold at retailers like Best Buy, Target, REI, Sprint, Verizon and Radio Shack, to name a few. The company has crafted an international footprint through strategic partnerships with global distributors.

LifeProof's new offerings this year include protective cases for the Samsung Galaxy SIII and S4, iPad mini, and the fifth generation iPad coming out.

LifeProof has also entered the first responder and military markets.

“If you’re out there in an emergency situation, you never know what the weather will be like. Being waterproof is a big, big plus for that environment," Rayner said.

At the Consumer Electronics Show in Las Vegas in January, LifeProof’s exhibit was in close proximity to OtterBox and the sea of other cover companies.

Jonathan Wegner, LifeProof's communications director, explained at the time why LifeProof stands out from the pack.

"A lot of other companies talk about protection and 'just in case,'" said Wegner.

LifeProof, however, frees users to not worry about whether they should shove their phone in their shoe at the beach, he said.

“If you drop it or it ends up in the pool or kids get ice cream on it, just wash it off in the sink. It’s all about freedom and peace of mind,” said Rayner.

LifeProof has made a name for itself among the crowded market of a couple hundred iPhone case makers.

“What we’ve pioneered is an entirely new category. Coming up with a case that is sleek, slim and elegant. ... Your iPhone and Android device is everything it was before but now it’s impervious to life,” he said.

The company has also spent time developing intellectual property, ranging from seals and gasketing, latching systems and ways of conducting sound in audio that don’t cause any degradation.

“These breakthroughs in innovation have resulted in 2,500 pages of patents,” Rayner said.

As of early May, the company has been awarded five patents with another 13 pending.

“IP, we believe, will be an important part of being able to preserve our position in the marketplace,” he said.

Ultimately, however, LifeProof’s branding and inertia in the marketplace is what’s resulted in sustained growth.

“It is making it much more difficult for new merchants to come in,” he said.

Thomas said the acquisition deal took about 120 days to complete.

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