Italian eyewear maker Luxottica (NYSE:LUX) and France’s leading lens manufacturer, Essilor (EPA:EI), have reached a €46 billion ($49 billion) agreement to merge and create a global eyewear company with annual revenue of more than €15 billion.
“Finally … two products which are naturally complementary—namely frames and lenses—will be designed, manufactured and distributed under the same roof,” Luxottica’s founder Leonardo Del Vecchio said in a statement on Monday, according to Reuters. Luxottica shares were up by 8.6% to €53.80 on Monday afternoon, while Essilor shares were up 12.2% to €114.60.
The deal is one of Europe’s largest cross-border tie-ups, the news outlet reported, and temporarily removes uncertainty over succession at Luxottica; the company has lost 3 CEOs in 4 years over disagreements with Del Vecchio.
“The strategic rationale is strong,” JPMorgan Cazenove analysts said in a note to investors, saying that the deal also removes the risk of growing competition between the two companies. In recent years, Essilor purchased online retailers, and Luxottica has invested in lens manufacturing.
The merged company will have 140,000 staff and a Paris headquarters. On Monday, the two companies said the newly-formed group will list in Paris. But today, del Vecchio was quoted saying that the merged company will consider a listing in both Italy and France, as well as the U.S.
Del Vecchio will serve as CEO and executive chairman of the merged group, while Essilor CEO Hubert Sagnieres will be executive vice-chairman and deputy CEO. Sagnieres and Del Vecchio will have the same powers, they said in a conference call with analysts.
“We have and share the same values, we have and share the same vision, we have and share the same interest in the product … If we really want to provide consumers with the best product, Leonardo and I will have to co-manage,” Sagnieres said.
“This marriage will take place and will work,” Del Vecchio added.
Del Vecchio will be the biggest shareholder of the group, with a stake of 31% and 38% through his family holding company Delfin.
The deal is expected to close by the end of 2017 and Del Vecchio is confident that they will gain approval from competition authorities, Reuters reported.
Luxottica and Essilor have both seen slower sales growth in recent years and have tried to shift the companies’ focus to e-commerce. Luxottica’s third quarter results showed revenue from online platforms grew by 18%, while overall sales were only up 1.4%.
The companies expect that the merger will boost operating profit by €600 million, leaving smaller rivals like GrandVision and Safilo Group lagging behind.
Materials from Reuters was used in this report.
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