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Essilor & Luxottica to merge

The headline reads: Essilor and Delfin to create a global integrated player in the eyewear industry with the combination of Essilor and Luxottica. This is going to be very big. The two businesses are likely to create a giant in eyewear, sunglasses and lenses. Essilor has a market cap of 22.3 billion Euros, trades on a 28 multiple (historic) and Luxottica has a 24 billion Euro market cap, and trades on a 30 multiple. The all scrip merger (accepted by the Del Vecchio family, through their entity Delfin) is done at the following ratio: 0.461 Essilor share for 1 Luxottica share.

Cost savings of 400 to 600 million Euros over medium term, the combined group plans to move a harder to grow sector, correcting the vision of 2 and a half billion people, who are currently untreated. Be happy for your four eyes, that means that you can afford it, you see? What is most pleasing about this deal is that the controlling family stake on the Luxottica side has lost the overall grip on the business, it will fall to between 31 to 38 percent. We said at the last half year results (Luxottica's tough first half) - "The governance issues do bother us. The fact that there have been three CEO's in two years and the major shareholder is meddling and can't let go."

This is most pleasing, from that aspect, the Essilor release says the following, from the founder of Luxottica, Leonardo Del Vecchio: "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." We are pleased that this has transpired. We now await shareholder and regulatory approval and will keep you advised as to what next. The combined entity will only be 10 percent of global frames, 40 percent of lenses (which may, or may not be a problem). Nothing for us to do at all here.


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