Italy’s Luxottica and France’s Essilor have agreed to one of Europe’s largest\never cross-border mergers, a €50bn deal that would create the global leader in\nthe fast-growing eyewear industry.\n\nThe deal would see Luxottica, the world’s leading consumer eyewear group and\nowner of Ray-Ban, Oakley and Sunglass Hut, merging with Essilor, the biggest\nmanufacturer of lenses.\n\nLeonardo Del Vecchio, Luxottica’s 81-year-old billionaire founder and Italy’s\nrichest man, will become the largest single shareholder in the merged group,\nholding about a third of the new company, though his voting rights will be\ncapped at 31 per cent. Essilor was advised by Citi and Rothschild, while\nMediobanca advised Luxottica.\n\nThe long-mooted deal will create a group with a combined market value of about\n€50bn, combined sales of about €15bn and staff of more than 140,000. \n\nThe deal would rewrite the dynamics of the €90bn eyewear industry, one of the\nfastest-growing consumer sectors.\n\nProfileLUXOTTICA’S LEONARDO DEL VECCHIO\nItaly’s richest man shows no sign of taking a back seat following deal with\nEssilor\n\nMonday, 16 January, 2017Of the world’s 7.3bn people, 63 per cent are considered\nto be in need of vision correction — but only 1.9bn have purchased glasses,\ncontact lenses or had surgery. More than 2.5bn are still in need, particularly\nin Asia, Africa and Latin America, according to industry data.\n\nMeanwhile, the risks posed by a changing atmosphere, which has made ultraviolet\nrays from the sun more damaging, and blue light from computers and smartphones\nare pushing sunglasses from a discretionary item to a “must-have” among emerging\nmiddle classes.\n\n“Our project has one simple motivation: to better respond to the needs of an\nimmense global population in vision correction and vision protection by bringing\ntogether two great companies, one dedicated to lenses and the other to frames,”\nsaid Hubert Sagnières, Essilor’s French-Canadian chairman and chief executive.\n\nThe companies said Mr Del Vecchio and Mr Sagnières would share executive powers\nequally. Mr Del Vecchio will become executive chairman and chief executive of\nthe merged group and Mr Sagnières will become executive vice-chairman and deputy\nchief executive. The merged group will be listed in Paris.\n\nLuxottica’s Leonardo Del Vecchio and Essilor’s Hubert Sagnières will share\nexecutive powers equally in the merged group © Paolo Bona/GettyA deal has been\nmooted since Mr Del Vecchio, who spent part of his childhood in an orphanage but\nis now worth €20bn, returned to the front line of Luxottica three years ago,\npromising he had come back to do deals. He had relinquished executive powers for\nthe preceding decade.\n\nUnder the terms of the deal Delfin, the Del Vecchio family holding company that\ncontrols Luxottica, will exchange its 62 per cent stake in the Italian company\nfor newly issued Essilor shares. \n\nProfileESSILOR’S HUBERT SAGNIÈRES\nDubbed the ‘chief evangelical officer’, the Frenchman is on profit-driven\nmission\n\nMonday, 16 January, 2017The deal was led for Essilor by Luigi De Vecchi,\nchairman of continental Europe for Citi and one of Europe’s most experienced\ndealmakers, together with Rothschild. Alberto Nagel, chief executive of\nMediobanca, advised Mr Del Vecchio.\n\nShares in Luxottica closed up 8.25 per cent to €53.65 on Monday while Essilor \nshares jumped 11.9 per cent to €114.2. \n\nEssilor and Luxottica considered a deal three years ago when Mr Sagnières\napproached Luxottica, said people involved in the talks.\n\nThe French group, which then was focused mostly on healthcare, saw a combination\nas a way to get access to consumers, but at the time failed to get the support\nof Mr Del Vecchio.\n\nEssilor has since undertaken a restructuring to turn it into a more\nconsumer-facing company providing a better fit with Luxottica, said people close\nto the transaction.\n\n“It was some time now that we knew that this was the right solution but only\ntoday are there the right conditions to make it possible,” said Mr Del Vecchio.\n\nAnalysisCONNECTED VISION\nRay-Ban owner and lens-maker plot growth through technology and new markets with\nmerger\n\nMonday, 16 January, 2017Since Mr Del Vecchio’s return, Luxottica has been\nplagued by analyst concerns about governance and succession, which have hit its\nshares. Three chief executives have left the group during the past two years.\n\nAnalysts have long suggested a merger with Essilor would provide a succession\nplan for the group, given the 20-year age gap between Mr Del Vecchio and Mr\nSagnières.\n\nLuca Solca, managing director at Exane BNP Paribas, said the deal “would be\nexcellent news for both stocks”.\n\n“It creates significant synergies, both in revenues and costs; it defuses the\nrisk of heightened competition between the two and it removes uncertainty on\nsuccession at Luxottica,” he said.\n\nThe long-term outlook for the eyewear industry is “optimistic”, with a compound\nannual growth rate of 2.5 per cent forecast for 2015-20, said May Ling Tham,\nhead of personal accessories and eyewear research at Euromonitor.\n\nThe deal is expected to be completed by the end of this year, subject to\nshareholder and regulatory approval.