Essilor, Luxottica to Merge, Creating $49 Billion Company -- Update

By Inti Landauro

PARIS--French optical lens maker Essilor International SA and Italian spectacle frames maker Luxottica said Monday they have agreed to merge, creating an eyewear industry giant with a market value of around EUR46.3 billion ($49.16 billion).

Italian holding company Delfin--which is Luxottica's main shareholder and will also be the leading shareholder of the new entity--will exchange its shares in the Italian maker of Ray-Ban and Oakley brands for newly issued shares in the French company.

Following the operation, Delfin will hold a stake of 31% to 38% in the new company. Delfin is owned by Luxottica's founder and executive chairman Leonardo Del Vecchio, it holds a 62% in Luxottica.

The shares will be exchanged at a ratio of 0.461 of Essilor's for one of Luxottica's.

The 16-member board of the merged company will be evenly divided between the two current businesses.

The merged companies will have a combined annual revenue of EUR15 billion and earnings before interest, taxes, depreciation and amortization of EUR3.5 billion.

Mediobanca was the sole adviser for Delfin, while Citigroup Global Markets Ltd. and Rothschild & Co. advised for Essilor.

As competition in the eyewear sector is escalating the two companies risked being on collision course, according to analysts. Essilor is specialized in lenses but is now moving into frames, while Luxottica focuses on frames and retailing activities, but is also expanding its lens manufacturing.

Late last year, Exane BNP Paribas' analyst Luca Solca said that the profit pool for both could shrink, because of a harsher price competition in both frames and lenses.

The merger has been in the works for years, according to a person close to the matter.

Luxottica's Chairman, Mr. Del Vecchio will become chief executive and executive chairman of the new entity, while Hubert Sagnières--chairman and CEO at Essilor--will become deputy CEO and vice executive chairman.

Write to Inti Landauro at inti.landauro@wsj.com

(END) Dow Jones Newswires

January 16, 2017 02:03 ET (07:03 GMT)

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