UPDATE 2-Luxottica eyes Asia growth with OPSM bid
Wed April 30, 2003 12:16 AM ET
(Adds analyst, OPSM comment, shares)
By Michael Smith

SYDNEY, April 30 (Reuters) - Italy's Luxottica Group SpA LUX.N , the maker of Ray Ban sunglasses, launched a A$550 million ($341 million) agreed bid for Australia's main optical retailer, OPSM Group Ltd, on Wednesday to extend its Asian reach.

Milan-based Luxottica LUX.MI , which also owns Bausch & Lomb and makes glasses for designer labels Chanel and Versace, said it would offer A$3.90 cash per share and assume OPSM's debt.

OPSM recommended shareholders accept the bid, which would give Luxottica control of Australia's largest optical retail chain as well as its stores in New Zealand, Hong Kong, Singapore and Malaysia.

Luxottica acquired Sunglass Hut International, which has 1,900 stores worldwide, a year ago for $653 million, making it a major competitor in the United States with Oakley OO.N .

The Milan-based eyewear group already owns subsidiaries in Japan, Hong Kong and Singapore, but makes most of its sales in North America and Europe.

"It is a logical move for any major optical retailer looking to come into Southeast Asia because OPSM is the dominant player in Australia," said Burdett, Buckeridge & Young analyst Adam Michell.

OPSM shares leapt 21.3 percent to A$3.88, a 14-month high, when the stock resumed trading after the deal was announced. The overall market was slightly firmer.

The deal added to the surge in merger and acquisition activity, particularly in mining, food and wine, in Australia so far this year.

Luxottica said the bid plus assumption of up to A$50 million in debt resulted in a total consideration of A$580 million, about eight times OPSM's expected EBITDA (earnings before interest, tax, depreciation and amortisation) in calendar 2003.

"The acquisition of OPSM represents a further step in our strategy to expand our retail business in Australia and New Zealand," Luxottica Chairman and company founder Leonardo Del Vecchio said in a statement. The company operates in 21 countries.

SARS IMPACT

The offer price takes into account an expected hit to sales in Hong Kong from the SARS virus, he said.

OPSM said the outbreak of Severe Acute Respiratory Syndrome (SARS) could cut up to A$4 million from its 2003 EBIT. Hong Kong represents about 15 percent of group sales.

OPSM Managing Director Jonathan Pinshaw told Reuters the group was on track to meet consensus EBIT forecasts of A$37.7 million, minus A$3.5 to A$4 million for the possible SARS impact.

"We have every intention of continuing our growth in Asia. Clearly with the SARS epidemic things are on pause, but they are certainly not on stop," he said.

Pinshaw, who said his future role with the merged group had not been discussed, said the offer was attractive for shareholders. There have been no rival offers so far.

OPSM, which aimed to be the largest glasses retailer in the Asia-Pacific, has 481 stores in Australia and 34 in New Zealand. It has expanded in recent years into Asia, where it has 80 stores in Hong Kong, 12 in Singapore and 12 in Malaysia.

Analysts said it has about 35 percent of the Australian retail market. Its closest competitor is unlisted Merringtons, which has about 50 stores.

Luxottica's New York-listed shares closed 0.1 percent firmer at US$10.99, and 0.5 percent higher at 10.07 euros in Milan.

($1=A$1.61) ((Reporting by Michael Smith, editing by Walter Watson; michael.j.smith@reuters.com; Reuters Messaging: michael.j.smith.reuters.com@reuters.net; + 612 9373 1815))