Wide eyed merger as Luxottica and Essilor join forces in a billionaire agreement to become world’s most powerful optic brand.
Luxottica and Essilor: a match made in Heaven, or at least so say the head executives of the largest eyewear manufacturer and world leader in corrective lenses, Essilor International SA and the largest eyeglass retailer, Luxottica, the makers of the popular brand Ray-Band as well as behind the frames for Luxury brands such as Armani, Chanel, and Prada, and owner of optic chains including Lenscrafters, Pearle Vision and Sunglass Hut. The idea behind this 48 Billion dollar fusion is to create an international conglomerate able to control the production of lens and frames as well as provide a unique platform in luxury eyeglass retailing.
“Finally, two products which are naturally complementary, namely frames and lenses, will be designed, manufactured and distributed under the same roof,” stated Luxottica’s founder and Italy’s second-richest person, Leonardo Del Vecchio, in a statement. “With this agreement my dream to create a major global player in the eyewear industry, fully integrated and excellent in all its parts, comes finally true.”
Investors seem to want to partake in the dream as well, as the stock of both companies rose quite substantially with shares of Essilor surging almost 19% in Paris, and Milan-based Luxottica also enjoying a 15% gain. According to data compiled by Bloomberg, the deal is the largest acquisition ever of an Italian company by a foreign buyer, which really makes this a big deal, as looking at it from a national scale, Luxottica is reportedly Italy’s fourth-largest publicly traded company (by market value) and the new company, which will be named EssilorLuxottica, will have a market capitalisation of around 46.2 billion euros ($49 billion dollars), based on both companies’ closing share prices on Friday. With annual sales of more than 15 billion euros the eyewear behemoth will employ a workforce of 140,000 worldwide.
Essilor’s CEO Hubert Sagnieres said: “Our project has one simple motivation: to better respond to the needs of an immense global population in vision correction and vision protection.”
As beneficial as the dream may be, there are some concerns. The deal still needs to pass the necessary paperwork, which means regulatory approval, and that means bypassing antitrust barriers. The worry is over the sheer reach of the new company and its involvement as leverage over independent opticians by being their sole supplier.
There is also the matter of executive structure. If sharing is caring, well Luxottica’s founder, Del Vecchio has not always played well with others; having had trouble sharing power and retaining alterante CEOs over the past few years. At 81 however, he is probably thinking of his enduring legacy and succession. As the deal stands, Del Vecchio will be CEO as well as executive chairman. Essilor´s main man Sagnieres, will be executive vice chairman and deputy CEO, reportably ´with powers equal to Del Vecchio’s´ a joint statement stated. There will also be a 16-member board made up of 8 executives from each company and the equity of EssilorLuxottica will be about 50 percent owned by each company’s shareholders.
“We share the same values, the same vision, the same interest in the products,” Sagnieres said. “This is a merger where they will be able to complement each other and create economies of scale on the supply chain.”
Consumers worldwide hope to enjoy the fruits of the merger.