Latest follow up on Essilor-Luxottica merger ..................................
Why the merger of Essilor and Luxottica matters
By Ian PollockBusiness reporter, BBC News
February 16, 2017
4 hours ago
Since their impending merger was announced in January, there has been remarkably little comment about the huge proposed deal to combine Essilor and Luxottica.
But there certainly should be.
These are two of the biggest firms in the lucrative international business of making spectacles. France's Essilor is the world's number one manufacturer of lenses and contact lenses, while Italy's Luxottica is the leading frame manufacturer.
It is not obvious that the merger is in the public interest, though the two firms certainly think it is.
"The parties' activities are highly complementary and the deal would generate significant synergies and innovation and would be beneficial to customers," says Essilor.
But there seems to be growing disquiet in the industry.
Gordon Ilett, of the Association of Optometrists, says: "This now allows the [enlarged] group to control all aspects of supply of product - from manufacture to the end user.
"Those businesses who remain as their customers will be indirectly controlled by the terms and conditions imposed by them.
"Whether their UK market share, following this merger, is sufficient for examination by the competition authorities is open to debate, but the effect of it will be reduced choice for the consumer, and will most likely result in reduced quality products longer term," Mr Ilett adds.
Potential stranglehold
If the deal goes through later this year the new company, to be called EssilorLuxottica, will become a behemoth of the industry.
It will sell not only lenses and frames around the world but will also be stocking its own optician's shops as well, such as Sunglass Hut, and LensCrafters in the US and Australia, both currently owned by Luxottica.
One long-standing independent UK wholesaler, who asked to remain anonymous, says the merged firm would be so powerful it would probably squeeze out some competitors.
"If those two companies merged there would be a branded frame supplier offering you high-end branded frames, and also offering UK opticians a lens and glazing deal, to suit, so they will control almost everything [they offer] to both independent retailers in the High Street and even the chains," he argues.
In his view this would amount, almost, to a stranglehold on the supply of high-end glasses, with some rivals giving up.
"I imagine it would knock out quite a few glazing houses in the UK, and it would probably knock out other fashion frame houses," he adds.
Big beasts
Unless you know about the eyewear business, or take an interest in investing in big European companies (they both have stock market listings) the names of the two big firms will probably have passed you by.
But if you have been inside an optician's shop you will certainly have heard of the brands they own and make. For instance, the leading varifocal lens brand, Varilux, is made by Essilor.
Just a year ago, in presenting its 2015 financial results to investors, Essilor boasted that it was "an undisputed leader with only 25% market share" of the combined world market for prescription lenses, sunglasses lenses and lenses for reading glasses.
When it comes to just the prescription lenses, it has a 41% share of the world market.
For its part, Luxottica owns several of its own brand names such as Ray-Ban and Oakley, and it also makes, under licence, spectacle frames which carry high-fashion names such as Armani, Burberry, Bulgari, Chanel, Prada, Ralph Lauren and Versace.
In 2015 the Italian firm made almost 10% of the 954 million frames that were sold worldwide that year, and claims that about half a billion of its frames are currently perched on people's noses.
The overall industry internationally is in fact quite fragmented with hundreds of other smaller manufacturers and related businesses such as glazing laboratories.
Market research firm GFK describes the optical industry as "a complex and extremely competitive market-space".
EU review?
Even so, with the two firms having a combined turnover of more than 15bn euros (£12.8bn), of which 3.5bn euros were in Europe, on the grounds of size alone the proposed merger easily meets the requirements of the European Commission for a formal review.
These are:
- a combined worldwide turnover of all the merging firms of over 5bn euros
- an EU-wide turnover for each of at least two of the firms of over 250m euros
An inquiry would see if the merged firm threatened to be too dominant, thus reducing competition and leading to higher prices for the customers.
A Luxottica spokesman told the BBC that the firm was confident that any scrutiny would not hinder the deal.
"The transaction is subject to mandatory submission to a number of anti-monopoly authorities including the European one, as is customary in transactions of this size and nature," he said.
"We are confident that the transaction does not raise anti-monopoly issues and will fully co-operate with the anti-monopoly authorities to obtain the required clearance," he added.
The EU itself says it currently has no comment to make and it has not yet been formally notified of the merger deal under the requirements of its own rules.
But the leading chain of opticians, Specsavers, views the impending deal with caution.
"Mergers are a continuing trend in optics, but this is a significant development which will result in huge supply chain and retail implications for the industry and consumers worldwide," the firm says.
"It is unlikely that the impact of the merger will be felt by consumers straight away but we will watch with great interest how the new organisation will arrange itself."
Very profitable
If you have ever bought a pair of spectacles with anything other than the most basic frame and lenses, you may have gulped at the price, possibly coming to several hundred pounds.
Of course, not all spectacles are expensive and not all of the sale price goes to the manufacturers.
Opticians and the wholesalers that supply them are businesses that seek to make a profit.
They also need to cover the costs of staff, equipment, shop and office space, stock and all that advertising.
But for the manufacturers such as Essilor and Luxottica, it is a stonkingly profitable business.
On worldwide sales of 6.7bn euros in 2015, Essilor made operating profits of 1.2bn euros.
For the same year, Luxottica sold goods worth 8.8bn euros and made operating profits of 1.4bn euros.
With cost-cutting at a merged business projected to save between 400m and 600m euros per year, profits could be boosted even further.
Will customers benefit as well?
Source: ==============>
http://www.bbc.com/news/business-38899892
When it comes to just the prescription lenses, it has a 41% share of the world market
Quote:
Originally Posted by BBC article
When it comes to just the prescription lenses, it has a 41% share of the world market.
That is a huge amount, they can claim as their present business, and the combination of the 2 corporations will try very hard to get that increased.
News Release: Essilor - 2016 Results .....................
News Release: Essilor - 2016 Results
GlobeNewswire • February 17, 2017
· Profit attributable to equity holders up 7.4% vs. 5.9% revenue growth·
Dynamism of fast-growing countries
·
An active year for acquisitions and partnerships
· Strong free cash flow generation
Charenton-le-Pont, France (February 17, 2017 - 6:30 am)
- The Board of Directors of Essilor International met on February 16, 2017 to approve the financial statements for the year ended December 31, 2016. The financial statements have been audited and the auditors are currently in the process of issuing their report.
See all of it: ==========>
http://finance.yahoo.com/news/news-r...053100263.html
Safilo group s.p.a. Reports ...................................
Quote:
Originally Posted by
COMEINPEACE
and now with safilos demise.....
SAFILO GROUP S.P.A. REPORTS PRELIMINARY Q4 AND FY2016 SALES
Padua, January 31, 2017 – The preliminary figures for 2016 indicate that Safilo’s full year total net sales reached Euro 1,252.8 million, slightly contracting compared to the Euro 1,279.0 million recorded in full year 2015 (-2.0% at current exchange rates and -1.2% at constant exchange rates) as a result of the negative impact of the brands that the Group stopped servicing. In the year, sales of the Going Forward Brands Portfolio increased 3.6% at constant exchange rates (+5.2% excl. Retail).
In the fourth quarter of 2016, Safilo’s total net sales equaled Euro 313.7 million, slightly declining compared to the same period of last year (-1.7% at current exchange rates and -1.7% at constant exchange rates), while the sales of the Going Forward Brands Portfolio recorded a positive performance (+0.5% at constant currency and +2.3% excl. Retail).
See all of it: ============>
http://investors-en.safilogroup.com/...cle&ID=2240938
They can always find names
Quote:
Originally Posted by
newguyaroundhere
LVMH buying a 10% stake in Marcolin is a bigger issue for Safilo right now. A number of LVMH brands are licensed with Safilo .............................
They can always find names and other brands for their products.
[/QUOTE]
