Essilor and Luxottica announce a €46bn merger
A global eyewear giant is being created ‘to answer the growing needs in visual health and the appetite for premium branded products’
Essilor and Delfin have announced the signing of an agreement that is designed to create an eyewear giant “dedicated to visual health and a superior consumer experience” by combining Essilor and the Luxottica Group.
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.
It is said that the new group will combine two major global players in the eyewear industry with a strong brand portfolio, global distribution capabilities and complementary expertise in ophthalmic lenses, prescription frames and sunglasses.
The new business, with annual sales worth almost €16bn, more than 140,000 employees and sales in over 150 countries, is expected to provide a growth platform “ideally positioned to seize future opportunities.”
The transaction will enable the combined group to better seize opportunities arising from the strong demand in the eyewear market, which are driven by the increasing need for corrective and protective eyewear and the appetite for strong brands, according to a press statement released today (16 January).
Under the terms of the agreement, 81-year-old Mr Del Vecchio (pictured right) will run the combined group, to be named EssilorLuxottica. Essilor's chairman and chief executive, Hubert Sagnières, (pictured left) will become his deputy.
Mr Sagnières explained: “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.”
He added: “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.”
Mr Sagnières claimed that: “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.”
Chairman of Delfin and executive chairman of the Luxottica Group, Mr Del Vecchio, said: “With this agreement, my dream to create a major global player in the eyewear industry, fully integrated and excellent in all its parts, finally comes true.
“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."
However, the reaction from the profession is not so positive. Independent practice owner and AOP councillor for the East Midlands, Tushar Majithia, told OT: “It is worrying that one company will have such a dominant position in the industry.”
Mr Majithia explained: “The biggest concern for most optical practices is that there will be a real shift to focus and drive growth of the online business, especially given Essilor’s recent acquisitions in this area.
“However, both companies rely on supplying high-margin premium products and I do not believe that it is in their interests to offer these in an online competitive market.”
He concluded: “With this in mind, I am sure that they will want to continue to work closely with independent practices like ourselves. It’s early days and we are looking for further assurances on their long-term strategy.”
Another independent practice owner, and AOP councillor for London, Gordon Ilett, said: “My view is that this merger completes the missing piece in the vertically integrated, global business model of the Luxottica Group. This now allows the group to control all aspects of supply of product – from manufacture to the end user.
“Much of this supply chain will be controlled directly by the Luxottica Group, and those businesses that remain as its customers will be indirectly controlled by the terms and conditions imposed by it.
“Whether the UK market share, following this merger, is sufficient for examination by the competition authorities is open to debate, but the effect of it will be reduced choice for the consumer and most likely, reduced quality products longer term,” he concluded.