Luxottica, Essilor agree 46-billion euro merger to create eyewear giant

Luxottica Agrees to Merge With Essilor in All-Share Transaction

The two companies said in a joint statement that the deal would entail Delfin - the holding company of Luxottica's founder Leonardo Del Vecchio - contributing its shares in Luxottica to Essilor based on an exchange ratio of 0.461 Essilor share for 1 Luxottica share.

The deal will create a a global giant group with a combined market value of about 50 billion euros, combined annual sales of about 14 billion and staff of 130,000 across dozens of countries.

Del Vecchio is to become the single largest shareholder, and will share "equal powers" with Essilor's Chairman and Chief Executive, Hubert Sagnières, according to a press release issued by Essilor.

Insiders say that while the move to combine Luxottica with the world's biggest lens manufacturer makes flawless sense from a strategic point of view, concerns over his own succession are also likely to have guided Del Vecchio's choice.

Essilor is buying the majority 62% stake of Luxottica, which is owned by Italian billionaire Leonardo Del Vecchio and his family, before moving to acquire the rest under takeover rules.

"Finally, two products which are naturally complementary, namely frames and lenses, will be designed, manufactured and distributed under the same roof", Del Vecchio said.

Shares of Luxottica were up 8.35% in Paris trading after the announcement, while Essilor shares traded 11.51% higher in Paris.

However, the new company will have more than 50 per cent of the sunglasses market and be the largest maker of spectacle frames, lenses and ready-made reading glasses, according to Jasmine Seng, an analyst at Euromonitor.

Mediobanca advised Luxottica on the deal, with Essilor advised by Rothschild. Once the merger is finalized, EssilorLuxottica will be listed in the French index, meaning that the Italian bourse will lose its fourth most valuable stock, Dow Jones reported. This will result in delisting of Luxottica from stock markets.

Essilor and Luxottica projected the newly combined company would progressively generate revenue and cost synergies ranging from roughly $424 million to $636 million in the medium term. It also does licensing for many fashion brands, including Prada, Chanel, Armani, Burberry and Dolce&Gabbana.

Del Vecchio returned to the helm in January 2016 after two years of management turmoil sparked by a falling out with his right-hand man Andrea Guerra, who quit in 2014.

Mediobanca advised Delfin on the merger, with Essilor advised by Rothschild and Citi.

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