Ray-Ban's Owner Gets Relief From Double Vision
July 31 2019 - 09:41AM
Dow Jones News
By Carol Ryan
It is a good sign that Ray-Ban's feuding bosses have agreed to
buy a smaller rival. But investors won't be fully reassured that
eyewear giant EssilorLuxottica's double vision problems are fixed
until after the summer vacation.
The company, created by a 2017 merger of French lensmaker
Essilor and Italian sunglass company Luxottica, said Wednesday that
it will buy majority control of Amsterdam-listed peer GrandVision.
The owner of Ray-Ban and Oakley as well as eye-care chains such as
Pearle Vision will initially pay $6.1 billion for a 77% stake in
the Dutch business, before making a cash offer to buy out minority
shareholders. Including GrandVision's net debt, the value of the
transaction will total $8.9 billion.
The deal isn't a surprise, given that EssilorLuxottica said
earlier this month it was in talks with the target. But it comes
against an unpromising backdrop. Luxottica's powerful founder and
chairman Leonardo Del Vecchio and Essilor's boss Hubert Sagnières
have openly disagreed about who should lead the world's biggest
eyewear company.
GrandVision boosts EssilorLuxottica's business in Europe, where
most of the Dutch company's 7,000-plus retail stores are located
and the acquirer is thin on the ground. As well as a big store
network, it gets GrandVision's online businesses: contact lens
e-retailer Lenstore and the Charlie Temple website that sells
glasses direct to consumers.
There are some unusual transaction terms: If the deal doesn't
close within 12 months, the price of each GrandVision share
increases by 1.5%. And there is a break fee worth a hefty 5% of the
total transaction value if the purchase doesn't go through.
Management sounded confident that competition probes would move
fast, given that European trustbusters already looked at the
industry during their review of the Essilor-Luxottica merger.
In May, Messrs. Del Vecchio and Sagnières agreed to end their
legal spat and find a new external CEO by the end of 2020. But the
governance problems will again come into focus at the company's
investor day in September. The two businesses are still being run
separately, more than two years after the tie-up was announced. And
EssilorLuxottica's management will have to explain in detail for
the first time where and when it will find approximately $500
million of cost savings from the merger.
The GrandVision deal shows that c-suite conflict isn't holding
up everything at EssilorLuxottica. Still, for investors, September
is the real test of the company's vision.
Write to Carol Ryan at carol.ryan@wsj.com
(END) Dow Jones Newswires
July 31, 2019 09:26 ET (13:26 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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