French lensmaker Essilor has agreed to buy Italy's Luxottica, maker of Ray-Ban sunglasses, in a bid to create a new global giant in the sector, the two groups announced on Tuesday.
Shares in Essilor, the world leader in corrective lenses, surged by nearly 14 per cent on the Paris stock exchange and Luxottica shares were up 7.6 per cent in Milan on the news.
The combined group will have market capitalisation of around 46.2 billion euros ($49 billion), based on both companies' closing share prices on Friday. Under the terms of the transaction, the family of Leonard Del Vecchio, Luxottica founder and chief executive, will hand over his stake to Essilor, which will then launch a public bid to buy the remaining shares.
Del Vecchio, 81, controls a 62 per cent stake via holding company Delfin. "Finally, two products which are naturally complementary, namely frames and lenses, will be designed, manufactured and distributed under the same roof," Del Vecchio said. "With this agreement my dream to create a major global player in the eyewear industry, fully integrated and excellent in all its parts, comes finally true." The combined group, to be known as EssilorLuxottica, will have annual sales of more than 15 billion euros and employ a workforce of 140,000 worldwide.
Brian, Garnier & Co analysts called the merger "a perfect fit... as both groups are leading their respective categories" of lenses and frames.
But they said the new group "might face anti-trust barriers since it would become a 'hegemonic supplier' for many independent opticians."
Del Vecchio will become chief executive of the new group and Essilor head Hubert Sagnieres his deputy, with "the same powers", a joint statement said. The boards of directors of both companies have approved the transaction. The deal still needs to receive the necessary regulatory approval, but is expected to be completed in the second half of this year.
Del Vecchio returned to the helm in January 2016 after two years of management turmoil sparked by a falling out with his right-hand man Andrea Guerra, who quit in 2014.
"Leonardo Del Vecchio's inability to find a successor probably weighed heavily on this idea of coming together" with Essilor, said a strategist at the French brokerage firm Aurel BGC. "The idea... has been around a long time, and though not on everyone's mind recently, and is now bearing fruit," he added.