Luxottica and Essilor confirm plans to merge companies

French lensmaker Essilor has agreed to buy Italy's luxury eyewear maker Luxottica in a bid to create a new global giant in the sector, the two groups announced Monday.

Essilor said the merger is created to meet growing global demand for corrective lenses, sunglasses and luxury frames.

Luxottica founder Leonardo Del Vecchio will lead the newly combined company as chairman and CEO. He will be chief executive and executive chairman of the merged company.

"By bringing together Essilor and Luxottica, the new group would be in an outstanding position to propose a comprehensive offering combining a strong brand portfolio, global distribution capabilities and complementary expertise in ophthalmic lenses, prescription frames and sunglasses", Sagnieres said.

It will see the creation of the global leader in all things optical - frames lenses, equipment, testing, brands and retailing - and included in it as a small component will be Australia's OPSM, as well as its US-based Sunglass Hut chain.

The management upheaval and uncertainty over who could take over at Luxottica, together with a slowing USA market, have weighed on its shares, which before the merger was announced on Monday were trading 27 percent off their 2015 peak.

The deal also removes - for now at least - uncertainty over succession at Luxottica, which has lost three CEOs since 2014 because of rifts with Del Vecchio.

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The combined company will be called EssilorLuxottica and its shares will trade in Paris.

The combined firm - operating under the name EssilorLuxotica - is expected to achieve revenue and cost synergies of up to €600m ($635.4m) in the medium term, according to the preliminary analysis published in Essilor's statement. Luxottica shareholders will exchange their holdings for Essilor shares under the all-stock deal.

Delfin would be the largest shareholder, owning between 31 percent and 38 percent of the new company.

The merged EssilorLuxottica will have 140,000 staff and will be headquartered and listed in Paris. The French lens maker will launch a mandatory exchange offer on all remaining Luxottica shares at the same ratio, with the aim of delisting Luxottica's shares. It also does licensing for many fashion brands, including Prada, Chanel, Armani, Burberry and Dolce&Gabbana.

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

Luxottica and Essilor, which have a market value of about 24 billion euros and 22 billion euros respectively, had explored a possible tie-up a few years ago.

  • Ronnie Bowen