EssilorLuxottica To Buy GrandVision

One of the European stocks that I like is EssilorLuxottica, the dominant global manufacturer and retailer of eye and sunglasses. This group resulted from the merger in October 2018 of the French lens-manufacturer Essilor and the Italian luxury frame maker Luxottica (it owns the Ray-Ban, Oakley Oliver Peoples and Persol brands, and manufactures most luxury brand sunglasses).

The deal made sense at the time because there is enormous global demand for glasses, both for fashion purposes and to correct short-sightedness. There were cost savings to be had from merging head-offices, and it was an opportunity to broaden the shareholder base of Luxottica and professionalise its management. The founder of Luxottica is the rather erratic 84-year-old Italian billionaire, Leonardo Del Vecchio.

Unfortunately, a vicious fight broke out between Del Vecchio and Essilor's retiring head, Hubert Sagnieres, after the merger. Both have accused each other of trying to take control of the combined group, violating the merger agreement which granted them equal status. Del Vecchio's investment company remains the largest shareholder of the new entity, although he has been diluted down to 32 percent.

This week EssilorLuxottica announced that it is trying to buy Dutch optician group GrandVision for up to 7.2 billion euros ($8 billion) in cash to take control of thousands of stores where it sells spectacles and lenses.

GrandVision, whose chains include Vision Express in Britain and For Eyes in the United States, has stores in more than 40 countries across Europe, Asia, North America and Latin America. It employs more than 37 000 staff. EssilorLuxottica already has retail outlets such as Sunglass Hut, LensCrafters and Pearle Vision.

But the deal is likely to face intense scrutiny by competition regulators in the European Union. They are known to be a huge pain the arse.