Lux/Cole Merger

[Cowboy]

By now most of us have heard that Luxotica and Cole are merging. I am not worried that it will have an impact on us, as the stores already existed and customers went there. But, what impact do you think that EyeMed, Lux's insurance program, will have on the industry? From my understanding, that if you want to become a provider, in order to capture some clients or maintain the ones you have, as their company may be switching to this program, it is required that you purchase $7500 in inventory and maintan that amount per year, is this true?
Do you feel that EyeMed will try to take over VSP, the nations only Non-Profit vision insurance program focused on the private sector?

I am just looking for some insight to what others think this merger will mean for the optical industry. thanks for any and all replies.
:cheers:

Cowboy

[jediron]

From what I have heard Lux. is going to keep Sears or Cole separate from there other identities ie. Lenscrafters, Sun Glass Hut ect. ect. for now. Also what I heard is Cole is saying the reason Lux bought them was, they are the only US optical that was on the upswing and Lux wanted to know how they were doing it. I know sounds lame but that is what I was told. Also I m
sure there division (Coles) of Cole Managed Vision which handles all there vision care properties figured very highly in this.:hammer:

[UFRich]

As a new optical we were applying to become a provider with Cole Managed vision. There are no chains in our town except Wal-mart. What impact could this have on our approval, and is it worth trying to become a provider?

UFRICH :cheers:

[gilweber]

Cowboy said:


Do you feel that EyeMed will try to take over VSP, the nations only Non-Profit vision insurance program focused on the private sector?

Cowboy

Cowboy, perhaps it was unintentional, but that sentence sure did make it sound as if you think VSP is the private practitioner's friend in this whole managed vision care game. If you are thinking that then you might wish to look more closely at some of the numbers. It's surprising to realize just how misleading the term "non-profit VSP" can be for most ophthalmic professionals.

While VSP might technically be a non-profit corporation, don't think that such status must mean that VSP will put more gold in practitioners' pockets because its tax status requires it to distribute income in excess of expenses. And don't think any less of EyeMed or any other plan SIMPLY because they acknowledge being for-profit organizations.

All vision plans are in business to make a profit, period. That's the bottom line.

Join a plan if you think it can help; reject it if you don't think it's going to be good for your practice. But please don't focus on the term **non-profit.** It has absolutely NOTHING to do with determining if a plan is going to be better for your practice or, even, if it's going to be fairer in the way it deals with you.

Want some numbers? Try these.

VSP California reported **net income** for 2002 of $83 million. Yes, net income for one year of $83 million. Think P-R-O-F-I-T.

And for the three year period 2000-2002 VSP California reported **net income** of $147 million. And those two figures are just on VSP's California operations.

How about this number... For year end 2002 VSP California reported cash-on-deposit of $66.8 million. That's a massive amount of cash bankrolled and not returned to those who absorbed steep discounts providing VSP services. Again, that's just for VSP California.

So how would you feel if you were a VSP California provider who took the financial "hit" for a company that's operating under the "non-profit" umbrella, yet it reports huge net income and bankrolls so much money? Might you wonder why the heck some of that money is not being returned to the providers? Might you wonder why a non-profit corporation needs to keep so much for itself?

Want to read more? See my article in Optometric Management (September 2003) at the following URL:

http://www.optometric.com/archive_re...er/0903069.htm

Gil Weber, MBA

[Cowboy]

Gilweber,

Thanks for the #'s. But it was for reference purpose only that I suggested VSP. In lamens terms, if EyeMed gets that big, and they go after a large company as VSP, who would be next, and at what point should anti-trust laws take place to slow down the monopolistic pattern Lux is showing. Please, extend me a little credit as to who makes what and, that a business - any of them - are in it just for that, Business Profits!

[gilweber]

[QUOTE]Cowboy said:

(snipped)

Thanks for the #'s. But it was for reference purpose only that I suggested VSP. In lamens terms, if EyeMed gets that big, and they go after a large company as VSP, who would be next, and at what point should anti-trust laws take place to slow down the monopolistic pattern Lux is showing. /QUOTE]

Were EyeMed to acquire VSP (extremely unlikely, perhaps impossible given that there are no shareholder/owners who can "sell" their interests in the company) it still would not trigger wildly ringing alarm bells in the DOJ, FTC, or any other agency that one might think is interested in anti-trust. After all, just look at Microsoft to see how dominant a company can get yet still be allowed to go about business without significant restraint.

MS's market share and dominance in the computer software industry is far greater than any market share that might result from a combined EM/VSP. Yet despite MS's absolute dominance in its industry the government has not stopped MS from growing, all to the obvious detriment of its competitors and consumers. Any decisions against MS have been slaps on the wrist.

I don't think anti-trust is anything more than a peripheral issue on Luxottica's radar screen.

Just my opinion, of course. YMMV.
Gil Weber, MBA

[jediron]

Cowboy you need to worry becuase EyeMed is big and with Cole managed Vision in Lux's fold there third party insurance busy is huge!:bbg: :D

[Jim Stone]

Would it suprise anyone to learn Monday morning that essilor bought all of lux? I tell you now it will happen someday.

[rep]

What you are speculating is impossible. Unlike all of the other companies that Lux has picked up -

Leonardo owns 71% of the outstanding shares.

Rep

[Jim Stone]

When is old Leo retiring?

[jediron]

Rep said:
What you are speculating is impossible. Unlike all of the other companies that Lux has picked up - Leonardo owns 71% of the outstanding shares.


That's what everybody was saying about the acquisition that just
occurred. So while everybody is like chicken little crying the sky is falling, Lux's is comely going about there business buying up everything in site. Don't kid yourself they are not done. Not much is made of the Australian optical that Lux brought up before they brought Cole. So you still thing they will stop with just Cole Vision? Not a chance. They are eyeing other opticals to add to their portfolio. I know your point is that Leonardo himself owns the majority of his other acquisitions what is to say that he won't
own a majority share of the new company? Majority share is 51%
Ask George Steinbrenner Of the Yankees. If I remember correctly
he owns 51% which gives him the majority, so that is why all those stupid moves get done on the Yankees. Same with Lux. You
only need 51% to control the company.

And Essilor buying out Lux? Not a chance they have
not the cash or stock to swing a deal of that magnitude. Ya they
could go into a hole to buy it but why would they want to have
so much red ink only to have to sell off part of it to get out from under all the red ink! Does not make good business sence.

Just my two cents!
:bbg: :D

[chm2023]

I recently spoke to a large group of ODs and this subject came up. What stunned me was the lack of understanding and concern. In 2002, the private part of the optical business lost 2% share. The market has been flat or declining for the independent segment for the better part of 10 years. Luxottica's move to forward integrate into the largest managed care deliverer is a grave danger to the independent. Think of the leverage this will give them as a supplier, think of the expansion of their profit pool as they capture retail not wholesale value. Talked with some folks from Michigan-- General Motors has signed onto the Cole vision care plan--who were not aware of this. IMO it is time to thin the herd. If practices are not willing to compete as retailers, not doctors or medical professionals, but as retailers, with retail strategies and retail mind-sets, they should put a new coat of paint on the building and call the realtor.

[Chris Ryser]

chm2023 said:

.................. What stunned me was the lack of understanding and concern. In 2002, the private part of the optical business lost 2% share. The market has been flat or declining for the independent segment for the better part of 10 years. ...................... ..............

..................but as retailers, with retail strategies and retail mind-sets, they should put a new coat of paint on the building and call the realtor.

Could this dis-interest be because of today's practice by retailers to accept or ask for merchandise on consignment by suppliers. They could be worried to loose this privilege and have to buy and pay for their samples?

In the old day's an independent was truly independent and could tell a supplier to go and take a walk.

[Cowboy]

I think Chm2023 hit closer to home. the fact remains that insurances play an intrical part in our day to day lives. be it our own need for it or the patients we care for. With such a large player as Lux and now it new conglomorate, we will have to renegotiate our thinking. I believe I stated that I was not affraid of an impact, this may be true, but, I must swallow my pride and face that i have to re-think the way I do business in order to persuade (educate) my clients, previous and potentials, of the importance of staying with me and not feeding the lion.

:cheers: To you all

Cowboy

[rep]

Even if Leonardo retires his son Claudio would probably take over the family business. He's just as savy as his father, maybe even smarter. He has taken the remaining elements of the U. S. Shoe purchase ( Casual Corner, August Max and 5,7,9) and made them profitable, a feat that most clothing industry analyst thought was impossible. He also recently added Brooks Brothers to his retail clothing group and is in the process of turning them around.

Jediron

Please explain how Leonardo gave up ANY ownership by purchasing Cole. It was a cash purchase. No equity, no stock just 4oo Million in Cash to buy up all of the outstanding shares.

The largest single stockholder of Cole National was Larry Pollock with a meer 5% of the outstanding shares.

I absolutely agree about Essilor. Not even in the same league as Lux.



Rep

[paw]

Which has more money, Lux or WM?

[jediron]

Rep your the one that brought up the fact Leo owns 71%. I was only answering that you don't 71% to control a company. And by
the way maybe the cash was his?:hammer:

[Joann Raytar]

chm2023 said:
I recently spoke to a large group of ODs and this subject came up. What stunned me was the lack of understanding and concern. In 2002, the private part of the optical business lost 2% share. The market has been flat or declining for the independent segment for the better part of 10 years. Luxottica's move to forward integrate into the largest managed care deliverer is a grave danger to the independent. Think of the leverage this will give them as a supplier, think of the expansion of their profit pool as they capture retail not wholesale value. Talked with some folks from Michigan-- General Motors has signed onto the Cole vision care plan--who were not aware of this. IMO it is time to thin the herd. If practices are not willing to compete as retailers, not doctors or medical professionals, but as retailers, with retail strategies and retail mind-sets, they should put a new coat of paint on the building and call the realtor.

We are on the Cole Managed Vision panel and everytime we handle anything other than the Vision One Discount plan, which we matched before being on their panel anyway, I wish we didn't accept Cole. Their reimbursements are horrible. As a Cole provider, I am glad to see new management taking over. I know anything other than old fashioned indemnity plans are a headache to all of us but if there is a chance that the reimbusements will be better could it be that worse things could happen?

Our business and profits have been growing steadily every year so perhaps I am a bit out of the loop on this one. I will admit that one of our two offices is becoming very insurance heavy, mostly VSP, and I'm not sure I trust where that will end up in the future.

[Johns]

Jo,

I am just as concerned when our office starts taking too many insurances. We recently started blocking out appts for non-insurance customers only. We take them first, and we take more of them. Have VSP ? Prepare to wait 3 weeks if the VSP spots are filled up. We will no longer forsake cash customers for the sake of filling the chair w/ $10 co-pays.

Johns

[For-Life]

Jim Stone said:
Would it suprise anyone to learn Monday morning that essilor bought all of lux? I tell you now it will happen someday.

I am probably ignorant, but I cannot see Essilor buying a huge frame company like Lux. To me, they have too big of an ego to do so. But I do see Essilor slowly becoming a monopoly in the lens market, essentially because no one is doing the things that they are doing. Who knows? Maybe it will happen. I would rather have Essilor buy me out instead.

[Joann Raytar]

Johns said:
We take them first, and we take more of them. Have VSP ? Prepare to wait 3 weeks if the VSP spots are filled up.

That might be a tough one for us. We don't want to take the hit involved with using a private lab so we already run a two week turn-around on VSP jobs because we send them all in to be cut at a VSP approved lab. IBM, Boehringer-Ingleheim, SBC, Scholastic and other big companies are all VSP. We would be putting some of our safety accounts at risk by pushing the line too much. Currently we just let them know what the glasses would have cost without insurance, most of the SV patients figure out that the insurance costs more than the glasses pretty quickly but progressive wearers and houselholds with a couple of eyeglass and contact wearers get a big break.

At least EyeMed lets you use a private lab without penalty. It stinks when someone has to wait so long for -1.25 sphere that I could run in no time but it keeps us from having to spread the costs to the private pay people.

[paw]

Jo,
Why is turn-around so long at the VSP-approved lab?

We use an independent (VSP-approved) lab for all our jobs, both VSP and private pay jobs. We tell all patients their glasses will be back in a week or week and a half. Usually they are back in less than a week.

[BobV]

Johns, please be careful on how you approach patients with vsp and scheduling. The docs I used to work for set aside Saturdays for cash only patients and a vsp patient complained to the home office. Their response was "a vsp patient must be seen at any time-you cannot differentiate between a cash patient and one who has vsp."

So heads up...they're watching.

Bob V.

[Johns]

Bob V


I know what you're talking about, but there are only so many hours in a day, and we only have so many spots available.

[klewless70503]

Question for Jo, if you're still reading...

You talk about how lousy the reimbursements for Cole are, so it begs the question...why stay on the panel?

You mention some of the big employers in your area who are on VSP, so that makes sense, but I didn't understand why you felt you needed to take Cole?