Luxottica and Essilor in $49bn merger


Financier Worldwide Magazine

March 2017 Issue

March 2017 Issue

Luxury eyewear specialists, Italian frame manufacturer Luxottica Group and French optical lens producer Essilor International, have announced that they are to merge in an all stock deal worth $49bn.

The transaction, announced in January, will be one of biggest cross-border deals ever completed in Europe, and will create an industry powerhouse with annual revenue of more than €15bn. Luxottica, which owns the Oakley and Ray-Ban brands, currently has a 14 percent market share of the eyewear industry.  Essilor has a 13 percent share. Around half of the combined company’s revenue is expected to be generated in the US. Europe will account for roughly 22 percent, while Africa, Asia and the Middle East will contribute around 18 percent.

The companies expect the transaction to close in the second half of 2017, subject to regulatory and shareholder approval.

The new company is expected to have more than 140,000 employees and sales in more than 150 countries. According to Hubert Sagnières, chairman and chief executive of Essilor, the newly combined company will not be resting on its laurels in an increasingly fragmented and challenging $95bn eyewear industry. Indeed, given that both companies have been grappling with slowing sales growth, particularly in North America, and face rising competition from cheaper rivals, the merged company will be looking to branch into new areas, such as connected wearables.

Mr Sagnières has stated that one of the key drivers of the merger was the research and development process required to develop new innovative products. “How can we invent connected eyewear if we do not put together our researchers?” said Mr Sagnières. “We will be able to design that product and deliver it extremely fast to consumers through all the stores of the world and all [our] networks.”

For Luxottica, the decision to merge with Essilor may also have been driven by the considerable gains it has made. Over the last 10 years, Essilor’s share of the prescription lens market has doubled to 45 percent. When announcing the deal Mr Sagnières claimed “Our project has one simple motivation: to better respond to the needs of an immense global population in vision correction and vision protection by bringing together two great companies, one dedicated to lenses and the other to frames.” According to the two firms, there are at least 2.5 billion people in the world still suffering from uncorrected vision problems. In an industry which is growing at between 2 and 4 percent annually, this merger represents a significant opportunity.

“With extraordinary success, Luxottica has built prestigious brands, backed by an industry state-of-the-art supply chain and distribution network. Essilor brings 168 years of innovation and industrial excellence in the design, manufacturing and distribution of ophthalmic and sun lenses. By joining forces today, these two international players can now accelerate their global expansion to the benefit of customers, employees and shareholders as well as the industry as a whole,” added Mr Sagnières.

Luxottica’s emerging online platform will likely be key to the combined company’s future profitability, particularly in Asia and Latin America. Both regions are considered potential growth markets for the newly combined giant, which will be known as EssilorLuxottica and will be led by Leonardo Del Vecchio, the incumbent executive chairman of Luxottica Group.

Mr Del Vecchio noted that the merger of the two firms had been a long term strategic goal, one that had only been made possible by the prevailing global economic conditions. The marriage between two key companies in their sectors will bring great benefits to the market, for employees and mainly for all our consumers. Finally, after 50 years, two products which are naturally complementary, namely frames and lenses, will be designed, manufactured and distributed under the same roof.”

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Richard Summerfield

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