Do you wear glasses or sunglasses or have had your eyes checked at your local OPSM?  If your answer is yes to one of these questions, then chances are you own a pair of glasses or sunglasses from Luxottica and the lenses are manufactured by a company called Essilor and who are now about to become one company.

The combination of Luxottica and Essilor will create the largest eyewear company in the world and is set to help many millions worldwide to see better.

The following information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.

 

Earlier this week, Essilor International (“Essilor” or EI FP) announced that it would acquire Luxottica Group (“Luxottica” or LUX IM) in a deal worth approximately €26 billion (based on the closing price of Luxottica as at 16 January 2017).  The deal is a share swap where 0.461 new Essilor shares will be issued for 1 Luxottica share to create a newly merged company called EssilorLuxottica by the 2H of 2017.

The boards of both Essilor and Luxottica have provided unanimous approval for the acquisition and Luxottica’s largest shareholder, Delfin (owned by Leonardo Del Vecchio, who founded Luxottica in 1961), which controls 62% of Luxottica’s shares has also agreed to the acquisition.  Del Vecchio will become the Executive Chairman and Chief Executive Officer of the merged company and his company Delfin, will own about 31% to 38% of EssilorLuxottica depending on the level of acceptance from other Luxottica shareholders.

Who is Essilor?

Essilor is listed on the Euronext Paris Stock Market with a market value of approximately €25 billion (based on the closing price of Essilor as at 16 January 2017).  It was established in 1849 and designs and manufactures a wide range of eyewear lenses to improve and protect eyesight.  It also develops equipment, instruments and services for eyecare professionals.  Essilor reported consolidated revenue of more than €6.7 billion in 2015 and has 32 plants, 490 prescription laboratories and edging facilities, as well as five research and development centres around the world.  It distributes its products in more than 100 countries via mainly wholesale channels as well as online.

A reminder about Luxottica

As our members know, Luxottica at the time of writing forms part of our portfolio in the Splurging Baby Boomers Fund.  It was founded in 1961 and is listed on the Milan Stock Exchange and designs, manufactures and distributes a wide range of fashion, luxury and medical eyewear.  It owns proprietary brands such as Ray-Ban, Oakley, Vogue Eyewear, Oliver Peoples and Alain Mikli as well as licensed brands including Giorgio Armani, Burberry, Chanel, Coach, Dolce & Gabbana, Prada, Ralph Lauren, Valentino and Versace.

Luxottica’s global distribution network spans more than 150 countries and includes an extensive retail network of approximately 7,800 stores with LensCrafters and Pearle Vision in North America, OPSM and LensCrafters in Asia-Pacific, GMO in Latin America, Salmoiraghi & Viganò in Italy and Sunglass Hut globally.  Luxottica posted net sales of approximately €9 billion in 2015.

EssilorLuxottica, the €50 billion eyewear company

The combined company will become the largest eyewear company in the world with a market value of over €50 billion, sales of over €15 billion and earnings before depreciation, amortisation, tax and interest of over €3.5 billion.  Its combined net debt levels would total just over €3.1 billion making its balance sheet strong and flexible.

The two companies are merging complementary businesses, product and service offerings as well as different distribution channels.

So why is eyewear a growth story, why will EssilorLuxottica benefit from this growth story and how many people around the world still need glasses? The answers may surprise you.

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About Kevin Hua

Kevin Hua is a Co-Founder of AtlasTrend, an online investment platform that makes it easy for anyone to learn and invest in trends transforming our world. Kevin has over 19 years experience in financial markets including as Senior Portfolio Manager at Atrium Investment Management and Stark Investments.