(Update: the impact of the merger on the Milan stock Exchange, elaborates on the issues of management and succession in Luxottica, reaction on the stock Exchange)
The specialist of ophthalmic lenses, Essilor (>> ESSILOR INTL.) and the manufacturer of eyewear frames Luxottica (>> Luxottica Group SpA) will merge to give birth to a giant of the optical annual turnover of over 15 billion euros and the gross operating surplus of some € 3.5 billion, were announced the two groups Monday in a joint press release. The transaction would be valued at around 50 billion euros on the stock Exchange, by integrating synergies.
“This operation would allow the new entity to better capture growth opportunities related to the strong demand in the market of optics, supported by the growing need of corrective eyewear, and protective, and by the desire of consumers to wear the brands”, said the two groups.
This approximation is announced that the two companies were increasingly in competition, Essilor is gaining a foothold in the manufacturing of frames and Luxottica in ophthalmic lenses.
“This is the first time since the creation of corrective lenses many centuries ago, that a company will manufacture both frames and lenses”, said Hubert Sagnières, CEO of Essilor, during a press conference.
In total, the market that would evolve the new group is estimated at approximately $ 95 billion, said Hubert Sagnières.
The market is applauding the marriage, the Milan stock Exchange big loser
In a first time, Delfin, the largest shareholder of Luxottica, with 62% of the share capital, has committed to contribute its shares to Essilor in exchange for new shares issued by the French group, which will then be a public offer of mandatory exchange on Luxottica with the same ratio of 0,461 action Essilor for an action Luxottica.
Monday 12: 00 noon, the announcement of this approximation allowed the action Essilor to climb to 13.2%, 115,60 euros, and the action Luxottica jumped from 8.8% to 53,90€.
It is a “win-win” as well as solid logic, writes Raymond James. According to the society of Scholarship, this approximation presents a potential in terms of services, in the emerging countries where the two groups are relatively little present, and on the Internet.
If the operation promises to be beneficial for the shareholders, one of his main losers will be the Italian stock Exchange. The new set will be listed in Paris, depriving the city of Milan from its fourth market capitalization behind the major oil company, Eni, (>> Eni SpA), the electrician Enel (>> Enel S. p. A.) and the bank Intesa Sanpaolo (>> Intesa Sanpaolo SpA). Although the title Luxottica is evolving away from the high points achieved by 2015, it is worth more than some of the Italian companies, the most well-known, such as Generali (>> Assicurazioni Generali SpA), Fiat Chrysler Automobiles (>> Fiat Chrysler Automobiles NV) or Ferrari (>> Ferrari NV).
The holding company of the Italian Delfin for the first shareholder
Delfin to become the first shareholder of the new set, called EssilorLuxottica, with 38% of the capital, and 31% if the shareholders of Luxottica bring all their actions to the operation. Delfin is the family holding company of Leonardo Del Vecchio, 81, the founder of Luxottica, which owns such brands Ray-Ban and Oakley.
It has encountered difficulties in recent years to establish a management structure with long-term stability within Luxottica. After the departure in 2014 of the director-general Andrea Guerra, who was in conflict with Leonardo Del Vecchio, the founder took the reins of the group. But his decision has provoked a revolt in the board of directors and the departure of another leader key in the group. She was also a decline in the market price of Luxottica.
investors have feared that the family Del Vecchio and the question of succession of the founder can undermine the independence of the executive team. To address these concerns, Leonardo Del Vecchio has backtracked, and created a structure dual to the head of the group. However, one of the two co-directors-general left Luxottica in 2016, which has led the founder to once again take the reins of the company in order to control more directly the division of markets, which includes the strategy in the emerging markets, the development of digital and e-commerce.
More recently, Luxottica announced that the issues of succession and family interests were no longer of actuality, Leonardo Del Vecchio has distributed its stake in the controlling holding company of Luxottica, in equal shares between his sons, who do not sit on the board of directors and do not occupy any position within the company.
after the completion of the merger, the voting rights of any shareholder of EssilorLuxottica would be capped at 31% and the double voting rights attached to the shares would be removed, according to the two groups.
synergies of 400 to 600 million euro medium term
On the basis of preliminary estimates, the new set is expected to generate progressively synergies, which would reach a total of between 400 and 600 million euros in the medium term and that would accelerate over the long term, have also indicated the two groups. About half of these synergies would focus on revenues, said Hubert Sagnières.
“In some cases and countries, there will be some cost synergies, particularly on the supply chain [supply chain] to go faster in the distribution,” said the officer. At the head of more than 140,000 employees, the new entity would be present in more than 150 countries.
In addition, the new group “would have a strong balance sheet, strong cash flow generation and financial flexibility own to finance its future growth both external and internal, have added Essilor and Luxottica.
Leonardo Del Vecchio, the executive chairman of Luxottica, would become CEO of EssilorLuxottica. Hubert Sagnières, 61 years of age, the current CEO of Essilor, will become vice-chairman and CEO delegate EssilorLuxottica and would have the same powers as those of the CEO.
Composed of 16 members, the board of directors of the new entity would be shared equally between representatives of the two groups.
Several required permissions
To succeed, the operation must obtain a derogation from the Autorité des marchés financiers (AMF) at the beginning by Delfin of a public offer on all of Essilor, the green light of the shareholders of Essilor – including those of its holders of voting rights double – and the approval of the competition authorities concerned, according to Essilor and Luxottica.
The capital of Essilor is fragmented, employees, retirees, and partners representing its largest shareholder with 8.3% of the capital.
“The completion of the transaction is expected for the second half of 2017, subject to the satisfaction of the conditions precedent, and would be followed by the public offer of mandatory exchange initiated by EssilorLuxottica for all of the shares issued by Luxottica, remaining in circulation,” they said.
-Ambrose Ecorcheville, Dow Jones Newswires; 33 (0)1 40 17 17 71; ambroise.ecorcheville@wsj.com ed: VLV – ECH – LBO
(Inti Landauro, Eric Sylvers and Valerie Venck contributed to this article)
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