Essilor and Delfin have announced the signing of an agreement ‘designed to create an integrated player dedicated to visual health and superior consumer experience through a combination of Essilor and Luxottica Group’.
Together, Luxottica and Essilor would have more than 140,000 employees and sales in more than 150 countries. Based on the companies’ 2015 results, the new company would have posted combined net revenues of more than €15 billion and combined net EBITDA of approximately €3.5 billion. Based on a preliminary analysis, the combined group is expected to progressively generate revenue and cost synergies ranging from €400 million to €600 million in the medium term and accelerating over the long term.
Since its creation in 1961, Luxottica has built a portfolio of proprietary and licensed eyewear brands, it operates a retail and wholesale network in both developed and emerging markets, along with an e-commerce platform; manufacturing footprint makes up the backbone of the company. Essilor has been successful in bringing innovative solutions to ophthalmic lenses and creating internationally recognised brand and has also developed new approaches in the sunwear segment and online retail.
The transaction would entail a strategic combination of Essilor’s and Luxottica’s businesses consisting of Delfin contributing its entire stake in Luxottica (approx. 62 per cent) to Essilor in return for newly-issued Essilor shares to be approved by the Essilor shareholders meeting, on the basis of the exchange ratio of 0.461 Essilor shares for 1 Luxottica share, and Essilor subsequently making a mandatory public exchange offer, in accordance with the provisions of Italian Law, to acquire all of the remaining issued and outstanding shares of Luxottica pursuant to the same Exchange Ratio and with a view to delist Luxottica’s shares.
Essilor would become a holding company with the new name ‘EssilorLuxottica’ via a hive-down of all of its operating activities into a wholly-owned company, to be called Essilor International, and the contribution by Delfin of its Luxottica shares.
Following the transaction, Delfin would own between 31 and 38 per cent of the shares of EssilorLuxottica and would be its largest shareholder. The voting rights of any shareholder of EssilorLuxottica would be capped at 31 per cent and there would no longer be double voting rights for the shares.
The transaction is subject to Essilor’s Works Councils’ information and consultation procedure according to French law.
On 15 January 2017 the Essilor board of directors unanimously approved the agreement with Delfin, which it considered to be in line with the best interests of shareholders, employees and other stakeholders, and decided to initiate the information and consultation of its works councils on the basis of such proposed transactions. On the same day, the Luxottica of board of directors unanimously acknowledged that the transaction is in the best interest of Luxottica and shared the strategic rationale of the business combination.
Luxottica’s executive chairman, Leonardo Del Vecchio, would serve as executive chairman and CEO of EssilorLuxottica. Essilor chairman and CEO, Hubert Sagnières, would serve as executive vice-chairman and deputy CEO of EssilorLuxottica with equal powers as the chairman and CEO. Leonardo Del Vecchio and Hubert Sagnières would also keep their positions of executive chairman of Luxottica and chairman and CEO of Essilor International, respectively.
Hubert Sagnières, chairman and CEO of Essilor stated: “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. 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.”
Leonardo Del Vecchio, chairman of Delfin and executive chairman of Luxottica Group added: “With this agreement my dream to create a major global player in the eyewear industry, fully integrated and excellent in all its parts, comes finally true. It was some time now that we knew that this was the right solution but only today are there the right conditions to make it possible. 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 fifty years, two products which are naturally complementary, namely frames and lenses, will be designed, manufactured and distributed under the same roof.”