Last year, I wrote a glowing endorsement of Essilor-Luxottica, the dominant global manufacturer and retailer of eye- and sunglasses. This group resulted from the merger in October of the French lens-manufacturer Essilor and the Italian luxury frame-maker Luxottica (it owns the Ray-Ban and Oakley brands).
The deal made sense because there were cost savings to be had from merging head offices, and it was an opportunity to broaden the shareholder base of Luxottica and professionalise its management. The founder of Luxottica is the rather erratic 83-year-old Italian billionaire Leonardo Del Vecchio.
Unfortunately, a vicious fight has broken out between executive chairman Del Vecchio and his French deputy and Essilor head, Hubert Sagnières. Each has accused the other of trying to take control of the group, thus violating the merger agreement, which granted them equal status.
Del Vecchio’s investment company remains the largest shareholder of the combined group, although he has been diluted to 32%.
The deadlock has been worsened by a split on the 16-member board of directors — with eight each having been selected by the Italian and French factions. No surprises there!
A group of institutional investors led by Fidelity is seeking to take some action to “unblock” the stalemate. The board has also appointed a French mediator to try to resolve the power struggle.
EssilorLuxottica shares have declined 1% so far this year, which is much worse than their peer group. The company market value is €46.3-billion. Investors should remain patient. This corporate scrap will get resolved, somehow. I think that Del Vecchio will lose in the end, and that will be good for shareholders.
• Theron is CEO of asset manager Vestact.
• From the June edition of Wanted 2019.