Luxottica, Essilor in 46 billion euro merger deal to create eyewear giant: Sources

[Chris Ryser]

THE ASSOCIATED PRESS
Published: January 15, 2017
Updated: January 16, 2017 6:44 AM
Filed Under:
The Province > business > all
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PARIS - A new European eyewear giant is set to emerge as Italian frames maker Luxottica — maker of brands like Ray-Ban and Oakley — joins with French lens manufacturer Essilor in a multibillion-euro merger.

Essilor International SA announced Monday it had reached a share exchange deal with Luxottica's main shareholder, Delfin, to create a combined company making both frames and lenses.

Shares in Luxottica and Essilor jumped on the news.
The statement said the new company would have combined revenues of more than 15 billion euros ($16 billion), 140,000 employees and sales in more than 150 countries.
Essilor said the merger is an effort to meet growing global demand for corrective lenses, sunglasses and luxury frames.

What is going to be the impact of this happening ?

We could really start spinning the wheel and guess what is going to happen to the conventional optical market in the retail as well as the wholesale in the near future.

Dozens of newspapers in Europe have posted the facts today in Europe alone and can be found on Google.

[Essilux]

Just keep this in mind.

Del Vecchio currently owns 62% of Lux. Because of this his entire motivation is to grow the retail market and sell lux frames to IECP's.

Under the new model he would own between 31-38% but would not have controlling power over executive board. (that would be equal between Essilor and Lux.) Also he is older at 81 years of age so his position could soon be vacated leaving Hubert in charge as CEO/President.

This means that instead of only having a single minded focus of growing retail and big box, which is a crucial patient need-as much as many on this forum disagree-to now having the focus on growing the whole pie.

This deal doesn't preclude Lux from pursuing the agenda they already were on but it does provide a counter balance to that directive in the way of the IECP

full disclosure, I've worked for Essilor and have for a number of years. I have never worked for Lux.

[Quince]

Just keep this in mind.

Del Vecchio currently owns 62% of Lux. Because of this his entire motivation is to grow the retail market and sell lux frames to IECP's.

Under the new model he would own between 31-38% but would not have controlling power over executive board. (that would be equal between Essilor and Lux.) Also he is older at 81 years of age so his position could soon be vacated leaving Hubert in charge as CEO/President.

This means that instead of only having a single minded focus of growing retail and big box, which is a crucial patient need-as much as many on this forum disagree-to now having the focus on growing the whole pie.

This deal doesn't preclude Lux from pursuing the agenda they already were on but it does provide a counter balance to that directive in the way of the IECP

full disclosure, I've worked for Essilor and have for a number of years. I have never worked for Lux.

Sounds like Del Vecchio is looking at distributing the burden under his enormous umbrella, if I am understanding this correctly. Working for a local business run by an aging owner who hired self-sufficient managers, I can relate to the look into the near-future and gauging of worth to someone close to retirement. It would appear Del Vecchio doesn't play well with others, going by the original post, and therefore is looking for a way to hand off some of the work load without having to be too close to those delegated to.

Thanks for chiming in Essilux, and welcome to Optiboard! We talk smack about your overload- but you are a person, not your employer. Kudos to the brave

[Uilleann]

Think VSP will get sucked up into this hot mess next? I mean, why not?!

[lensmanmd]

Lux also owns EyeMed. Davis Vision and VSP should be shaking in their Uggs about now.

[Browman]

I would fricking LOVE to be a fly on the wall at Hoya of America right now. It bet it's hilarious.

[lensmanmd]

Not that I like Hoya either, but, yes, it would be amusing

[lensmanmd]

I would fricking LOVE to be a fly on the wall at Hoya of America right now. It bet it's hilarious.

[Uilleann]

I asked about VSP because it seems that - at least initially - there hasn't been so much as a peep about anti-trust issues and monopolies. One wonders if adding VSP to the above train wreck would start to ring the alarm bells for someone...t least on the American front?

[drk]

VSP is a mortal enemy of those Euro dudes. Not going to happen.

In fact, relatively tiny VSP is their only competition in the U.S.

[Uilleann]

But the gorilla sucked up EyeMed, who I believe were even smaller...

With this news, I can't imagine the discussion hasn't been had in a Lux smoke filled back room somewhere.

[Chris Ryser]

VSP is a mortal enemy of those Euro dudes. Not going to happen.

In fact, relatively tiny VSP is their only competition in the U.S.

If you have not lost much thought of which direction the optical retail market will be going from now on, start that thinking process going. Anything in the way of the future of this commercial venture will be eliminated sooner, than later.

Not to worry about VSP. If it will expand too much into on-line opticals they will be terminated one way or another.

Start worrying about your own position in the optical retail market. It looks so far, that nobody has tried to see the light and made a post about it.

In danger of first loosing out, are the Ma & Pa optical retail operations, which are destined for a move into history.

There will always be a market for upscale retailers that can provide special services for the rich and famous, as well as specialised visual problems.

Optometrists will be needed to supply the market with refractions until this problem will be solved by automatically testing the vision to an acceptable degree.

However they will be economically forced to let go of their selling Rx retail eyeglasses.

You are right now witnessing the merger of the worlds two largest optical corporations, into something that only the large oil companies have managed to do. Getting rid of the Ma &Pa service stations with a pump or two, and installing convenience stores, with eight gas pumps or more.

The optical B&M retail is bound to go the same way as gas service stations, if it does not smarten up, at a super fast way, by charging similar selling prices, as the online opticals do, and add the service cost of doing the business on top of it as extras, labour etc.

There will be soon a massive take over action, on any of the well established on-line opticals, as the new corporation of joined Lux and Essilor, will be easily able to get any amount of cash needed to do these transactions.

This Optiboard thread is not one of the amusing ones, just to pass a few minutes during a quite business day in the office.


These news can actually affect any optical retail and wholesale or manufacturing business dramatically.


So be ready to put on your optical seat belts, for the rough ride coming up.

[Chris Ryser]

Looking for your comments on this important matter for all of us in every optical field.

[optical24/7]

Well, I had to step outside to see if the sun came up....It did, that means the world is still turning. ( you wouldn't think so with some of the posts here).

Chris, we all don't have to lower our prices to internut levels just because Esilux owns most of the larger providers in that market. Do you really think they want to devalue the premium market ( and pricing) that they've worked so hard to create? ( Varilux and designer frames). Economy of scale will mean more profits, yes, but they aren't going to abandon their premium status.

Keep in mind the internet is just another micro market in a huge, multi-billion dollar market. This company is just making sure they aren't abandoning or ignoring one of the micro markets. Lenscrapers aren't about to suddenly lower their retail pricing.

As far as mom and pop shops..Consolidation in the medical field has been going on for the last 25-30 years, and has been accelerating. It make much more sense to partner up and share rent, staff and equipment to minimize costs. Mom and pop shops will be going away simply because it makes no sense going it alone (at least finacialy ).

This isn't the 1st time in the last 40 years to have "game changing" things happen....There has been doom and gloom advancements that was going to put all of us out of business, soft cl's ( they are so comfortable, who's gonna wanna wear glass!), IOL's ( no more cataract glasses to sell, I'm going to loose a lot of sales!), A one hour optical opened up just down the road, nobody's gonna come to me and wait a week!, Radial K, then Lasik, ( Everyone is gonna get surgical correction, no more glasses!) now this...Esilux.

I would council Independent ECP's to concentrate on your core strengths: personalized, superior service, unique products and the ability to turn on a dime at a moments notice to adjust to an evolving market. These are things no large conglomerate can do.

Now then, take a deep breath, hug your teddy bear and realize the sun came up again today, and will tomorrow.

[Tallboy]

I just did some math and the average cylinder of our patients today is 2.75. Whoa.

[JJopt]

The Essilor and Luxottica merger should be a wake up call for everyone in our industry to think clearly about the next evolution of their vertical integration. They now control their own production and distribution channels. The only part of the production they do not control is production of the Rx. That will be their next focus and it will only take a few legislative changes to open that door. Does anyone think that Vision Source, PERK/IVA or any of the other groups exist for the benefit of anyone but Essilor?

[Lab Insight]

I would fricking LOVE to be a fly on the wall at Hoya of America right now. It bet it's hilarious.

Naturally, they're going to spin it like they are now everyone's new best friend...has happened many times already and is pretty lame.

[Kurzsichtig]

I don't know what the situation is like in Europe. But I'm sure that will portend what could happen here.

I would like to know how it works over there.

Are there just ophthalmologists writing Rxs and giant vertical optical corporations filling them? I'm sure Lux has eaten all the competition over there as well.

Hi DRK, signed up just to answer you. I'm from Austria and can speak of the current situation here and in Germany.

Basically opticians can refract here as well as eye doctors. There are a few chains, None of them directly affiliated to essilor however. Luxoticca Frames sell like crazy. Essilor, zeiss and rodenstock are the biggest competitors, with honourable mentions from Seiko and hoya.

Brick and Mortar stores are well as ever.

We dont have stuff like VSPs tho, wich makes life easier.
Most big chain retail Offices have their own inscurance deals with a seperate insurance Company.

Hand crafted and alternative Frames are on the rise. Sure, Lux and Safilo take the cake, but smaller Labels fare quite well, and are really easy to get good contracts with.

greetings, looking Forward to other questions!

Edit: Internet based eyeglass purchases are rising, yet the biggest Websites still dont net profits and need substantial financial backing. I assume it will take a while in europe, because things like craftsmanship and personal bonding might run deeper traditionally.

[Chris Ryser]

Now then, take a deep breath, hug your teddy bear and realize the sun came up again today, and will tomorrow.

Thank you optical24/7, ...........for your encouraging and calming words and do not worry post.

We all do need opposite ideas to balance a discussion of this level. All the newspapers all full with these ESSILOR-LUXOTTICA news on a world wide basis this morning.

I checked already yesterday afternoon on the internet at 4pm and there were over 400 Newspapers carrying the story on a worldwide basis. In my local newspaper the story was a full 3/4 page.

Having followed this major corporations evolvement, over the last 50 years, out of professional as well as a personal basis, i am glad that I have not started to write the intended book on it. As the unintended and not expected happenings are developing now, you can expect a lot more to come and you might not like it.

Napoleon has resurrected and is well underway to commercial world domination in the optical field.

[Chris Ryser]

Hi DRK, signed up just to answer you. I'm from Austria and can speak of the current situation here and in Germany.

Basically opticians can refract here as well as eye doctors. There are a few chains, None of them directly affiliated to essilor however. Luxoticca Frames sell like crazy. Essilor, zeiss and rodenstock are the biggest competitors, with honourable mentions from Seiko and hoya.

Brick and Mortar stores are well as ever.

Willkommen zum OptiBoard .......................

Just to inform you that the North American Continent, and specially the USA, ..... were 50% of the individual States are not regulated, so anybody can be a street cleaner and open an optical shop the day after without having to learn the profession before, .......can open an opticians store and display, make and sell glasses.

This has been the perfect Essilor un-opposed playground to gain expertise on all angles of the optical business.

[drk]

The only part of the production they do not control is production of the Rx. That will be their next focus and it will only take a few legislative changes to open that door. Does anyone think that Vision Source, PERK/IVA or any of the other groups exist for the benefit of anyone but Essilor?

I don't see how that helps them, but we'll see.

[drk]

Thank you, Kurzsichtig for giving us a view of the continent.

It doesn't sound radically different than today's marketplace.

[drk]

I have to go "all analogy" here. Restaurants.

While our businesses are health care, there is a retail aspect for sure, so maybe restaurants apply.

I guess it's Applebee's or Outback Steakhouse or Red Lobster vs. the local restaurant.

There are some things "big corporations" just cannot do, and we'll have to do what they don't.

The problem, though, is in our world, we are "source"-ing our foodstuffs from Applebee's. Not only that, but Luigi and Jean-Paul are in our kitchens making the food, too.

[CNG]

Will Eye-wear be included in the new healthcare plan?

[Chris Ryser]

Merger of eyewear giants Luxottica, Essilor has a Canadian tint

ERIC REGULY - EUROPEAN BUREAU CHIEF
ROME — The Globe and Mail
Published Monday, Jan. 16, 2017 5:51AM EST
Last updated Monday, Jan. 16, 2017 4:58PM EST


The future of the global eyewear-industry giant created Monday through the merger of Italy’s Luxottica Group, owner ofthe Ray-Ban and Oakley brands, and prescription lens maker Essilor Internationalof France, will be in the hands of a Canadian.

The blockbuster deal, which will value the new company, Essilor Luxottica, at almost €50-billion ($70-billion), makesEssilor chairman and CEO Hubert Sagnières the heir apparent to his counterpart at Luxottica, Leonardo Del Vecchio, 81, Italy’s richest man.

Mr. Sagnières, who is 61, was born in France but worked in Canada for years and has Canadian citizenship. He will run Essilor Luxottica with Mr. Del Vecchio, who has had trouble keeping outsider CEOs at Luxottica and has stated that none of his six children will succeed him. He is presumably close to retirement.

Mr. Del Vecchio will become the newcompany’s executive chairman and chief executive officer. Mr. Sagnières will become executive vice-chairman and deputy CEO. Essilor and Luxottica said the two men would share equal powers.

The new company unites the world’sbiggest eyewear frames maker and retailer with the world’s biggest lens maker.It will have €15-billion in annual sales, annual operating income of€3.5-billion, 140,000 employees and sales in 150 countries. The merger marksone of the Europe’s biggest cross-borderdeals.

In addition to addressing the succession issue at Luxottica, the merger solves a problem that could have been damaging to both companies. Luxottica was developing a lens business while Essilor was getting into frames and buying online eyewear retailers, putting the two companies on a collision course that had been highlighted by analysts. The merger eliminates the competitive threat that could have hurt both companies’profit margins.

Traditionally, lens makers and framemakers have kept their distance from one another. The Essilor-Luxottica deal,an example of vertical integration, puts lenses and frames under one roof while providing the products with a vast retail network.

Analysts on the Monday morning conference call wondered whether the new company would be better defined as a health care company or a fashion company. I didn’t know if you can call it health care or fashion or whatever,” Mr. Sagnières said.


Mr. Sagnières joined Essilor in 1989 and has been the company’s boss since 2012. He was born in Vienne,France, received his MBA from the European Institute of Business Administration (INSEAD), near Paris, and was president of Essilor Canada, in Montreal,between 1991 and 1996. The Canadian division, created in 1972, has more than 1,000 employees and operates 40 optical laboratories and several lens coating facilities.

He acquired Canadian citizenship and wenton to run Essilor’s American operations. One of Essilor’s directors is LouiseFréchette, the former Canadian diplomat who was deputy secretary-general of the United Nations for eight years until 2006.

The share-exchange deal is technically a takeover of Luxottica by Essilor, with Essilor paying about €22.8-billion forthe Italian company. Mr. Del Vecchio’s investment holding company, Delfin, will contribute its 62-per-cent stake in Luxottica to Essilor in exchange for shares in the new company. Mr. Del Vecchio will become the largest shareholder, with a stake between 31 per cent and 38 per cent, though his voting rights will be capped at 31 per cent.

The shares of both companies soared on Monday. In Paris,Essilor was up 12 per cent, giving the company a market value of €22-billion.Luxottica, which is listed in Milan and New York, gained 8 percent, for a market value of €24-billion. Essilor Luxottica will trade on the Paris bourse.
Luxottica brings powerful global brandsto the new company. It was founded in 1961 in northern Italy by Mr.Del Vecchio, who was raised as an orphan and became a tool and dye maker. The company went on to dominate the industry for high-priced sunglasses and prescription frames to the point it has been criticized for allegedly keepingprices up through enormous market control.

Its house brands include Ray-Ban, Oakley,Persol and Alain Mikli. It makes frames under licence for many of the fashionhouses, including Prada, Giorgio Armani and Ralph Lauren and owns the Sunglass Hut, Lenscrafters and Target Optical chains.

Essilor, one of France’s oldest industrial companies, began life in 1849 as Essel and operated a eyeglass assembly shops in Paris. In 1959, it invented Varilux, thefirst progressive lens. Its merger with Lens maker Lissac in 1972 created Essilor, which would become a lens powerhouse.

Mr. Sagnières and Mr. del Vecchio had been circling each other for four years, but could never agree merger terms,partly, it appears, because of management turmoil at Luxottica. In 2014 alone,Mr. del Vecchio saw two CEOs leave the company.

The companies predicted strong growth.“Together, Essilor and Luxottica will be in stronger position to address the vision needs of the 7.2 billion people in the world out of which 2.5 billion people still suffer from uncorrected vision problems,” they said in a statement.

Source: =============>
http://www.theglobeandmail.com/repor...rticle33631206