Italy’s Luxottica and France’s Essilor have agreed to one of Europe’s largest ever cross-border mergers, a €50bn deal that would create the global leader in the fast-growing eyewear industry. The deal would see Luxottica, the world’s leading consumer eyewear group and owner of Ray-Ban, Oakley and Sunglass Hut, merging with Essilor, the biggest 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, holding about a third of the new company, though his voting rights will be capped at 31 per cent. Essilor was advised by Citi and Rothschild, while Mediobanca advised Luxottica. The long-mooted deal will create a group with a combined market value of about €50bn, combined sales of about €15bn and staff of more than 140,000. The deal would rewrite the dynamics of the €90bn eyewear industry, one of the fastest-growing consumer sectors. ProfileLUXOTTICA’S LEONARDO DEL VECCHIO Italy’s richest man shows no sign of taking a back seat following deal with Essilor Monday, 16 January, 2017Of the world’s 7.3bn people, 63 per cent are considered to be in need of vision correction — but only 1.9bn have purchased glasses, contact lenses or had surgery. More than 2.5bn are still in need, particularly in Asia, Africa and Latin America, according to industry data. Meanwhile, the risks posed by a changing atmosphere, which has made ultraviolet rays from the sun more damaging, and blue light from computers and smartphones are pushing sunglasses from a discretionary item to a “must-have” among emerging middle classes. “Our project has one simple motivation: to better respond to the needs of an immense global population in vision correction and vision protection by bringing together two great companies, one dedicated to lenses and the other to frames,” said Hubert Sagnières, Essilor’s French-Canadian chairman and chief executive. The companies said Mr Del Vecchio and Mr Sagnières would share executive powers equally. Mr Del Vecchio will become executive chairman and chief executive of the merged group and Mr Sagnières will become executive vice-chairman and deputy chief executive. The merged group will be listed in Paris. Luxottica’s Leonardo Del Vecchio and Essilor’s Hubert Sagnières will share executive powers equally in the merged group © Paolo Bona/GettyA deal has been mooted since Mr Del Vecchio, who spent part of his childhood in an orphanage but is now worth €20bn, returned to the front line of Luxottica three years ago, promising he had come back to do deals. He had relinquished executive powers for the preceding decade. Under the terms of the deal Delfin, the Del Vecchio family holding company that controls Luxottica, will exchange its 62 per cent stake in the Italian company for newly issued Essilor shares. ProfileESSILOR’S HUBERT SAGNIÈRES Dubbed the ‘chief evangelical officer’, the Frenchman is on profit-driven mission Monday, 16 January, 2017The deal was led for Essilor by Luigi De Vecchi, chairman of continental Europe for Citi and one of Europe’s most experienced dealmakers, together with Rothschild. Alberto Nagel, chief executive of Mediobanca, advised Mr Del Vecchio. Shares in Luxottica closed up 8.25 per cent to €53.65 on Monday while Essilor shares jumped 11.9 per cent to €114.2. Essilor and Luxottica considered a deal three years ago when Mr Sagnières approached Luxottica, said 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 at the time 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. “It was some time now that we knew that this was the right solution but only today are there the right conditions to make it possible,” said Mr Del Vecchio. AnalysisCONNECTED VISION Ray-Ban owner and lens-maker plot growth through technology and new markets with merger Monday, 16 January, 2017Since Mr Del Vecchio’s return, Luxottica 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 Sagnières. 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. The long-term outlook for the eyewear industry is “optimistic”, with a compound annual growth rate of 2.5 per cent forecast for 2015-20, said May Ling Tham, head of personal accessories and eyewear research at Euromonitor. The deal is expected to be completed by the end of this year, subject to shareholder and regulatory approval.
