Luxottica and Essilor agree €50bn merger
Deal creates global leader in fast-growing eyewear industry
Italy’s Luxottica and France’s Essilor have agreed a €50bn merger deal, one of the largest ever European cross-border transactions, creating a global leader in the fast-growing eyewear industry, according to people with direct knowledge of the event.
The deal, which is due to be announced before the market opens on Monday, sees Luxottica, the world leading consumer eyewear group and owner of Ray-Ban, Oakley and Sunglass Hut, merging with Essilor, the world leading manufacturer of lenses.
Leonardo Del Vecchio, Luxottica’s 81-year-old billionaire founder and Italy’s richest man, will become the largest single shareholder in the merged group and will control 31 per cent of voting rights, said one person informed about the terms of the deal.
Mr Del Vecchio and Essilor’s chairman and chief executive Hubert Sagnieres, 60, will equally share executive powers. Mr Del Vecchio will become executive chairman of the merged group and Mr Sagnieres will become executive vice-chairman. The merged group will be listed in Paris, said a banker familiar with the matter.
The long-mooted deal will create a group with a combined market value of about €50bn, combined sales of about €14bn and staff of 130,000.
It is set to rewrite the dynamics of the €90bn eyewear industry, one of the fastest-growing consumer sectors.
The main factor driving change is demographic shifts, especially in Asia. Of the 7.3bn people in the world today, 63 per cent are considered to be in need of vision correction, but only 1.9bn have purchased glasses, contact lenses or surgery. More than 2.5bn are still in need, particularly in Asia, Africa and Latin America, according to industry data.
Meanwhile, the risks of damage from increasingly potent sunshine, UV and blue light are pushing sunglasses from being considered a “nice to have” item to a “must have” among emerging middle classes.
The longer-term outlook for the industry is “optimistic” with a compound annual growth rate of 2.5 per cent forecast for 2015 to 2020, says May Ling Tham, head of personal accessories and eyewear research at Euromonitor.
Leonardo Del Vecchio
A deal has been mooted since Mr Del Vecchio who, as an orphan, spent part of his childhood in a poorhouse but who is now worth €20bn, returned to the front line of Luxottica three years ago promising he was back to do deals. He had relinquished executive powers for the previous decade.
Essilor and Luxottica considered a deal three years ago when French-Canadian Mr Sagnieres approached Luxottica to do a deal, say people involved in the talks.
The French group, which then was focused mostly on healthcare, saw a combination as a way to get access to consumers but failed to get the support of Mr Del Vecchio.
Essilor has since undertaken a restructuring to turn it into a more consumer-facing company providing a better fit with Luxottica, said people close to the transaction.
Meanwhile, Luxottica since Mr Del Vecchio’s return has been plagued by analyst concerns about governance and succession, which have hit its shares. Three chief executives have left the group during the past two years.
Analysts have long suggested a merger with Essilor would provide a succession plan for the group, given the 20-year age gap between Mr Del Vecchio and Mr Sagnieres.
Luca Solca, managing director at Exane BNP Paribas, said the deal “would be excellent news for both stocks”.
“It creates significant synergies, both in revenues and costs; it defuses the risk of heightened competition between the two and it removes uncertainty on succession at Luxottica,” he said.