French lens maker Essilor and Italy's Luxottica Group on January 16 decided to combine their operations and create an entity named EssilorLuxottica to create a giant in premium fashion and luxury eyewear industry.
Luxottica is a subsidiary of Delfin, which has eyewear brands such as Ray-Ban and Oakley, while Essilor created internationally-recognised brands such as Varilux, Crizal and Transitions. Essilor also operates in the sunwear segment and online retail.
The merger would entail Delfin contributing its entire stake in Luxottica (approximately 62%) 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. Subsequently, Essilor would make a mandatory public exchange offer 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.
Leonardo Del Vecchio, chairman of Delfin and executive chairman of Luxottica Group, said: "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."
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 percent and 38 percent of the shares of EssilorLuxottica and would be its largest shareholder. The voting rights of any shareholder of EssilorLuxottica would be capped at 31 percent and there would no longer be double voting rights for the shares.
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.
The EssilorLuxottica board of directors would consist of 16 members, with eight members each nominated by Essilor and Delfin.
The boards of Essilor and Luxottica on January 15, 2017, unanimously approved the agreement.
Based on the companies' 2015 results, the new firm would have posted combined net revenues of more than €15 billion and combined net EBITDA of approximately €3.5 billion. Together, Luxottica and Essilor would have more than 140,000 employees and sales in more than 150 countries.
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.
Citigroup Global Markets Limited and Rothschild & Co acted as financial advisors for Essilor, and Mediobanca for Delfin. Cleary Gottlieb Steen & Hamilton acted as legal advisor for Essilor, while BonelliErede and Bredin Prat for Delfin.