France's Essilor agrees merger with Ray-Ban maker Luxottica

Four years after first attempting it, France's Essilor and the owner of Ray-Ban maker Luxottica have agreed a €46bn merger that will create a new eyewear giant.

Luxottica executive chairman Leonardo Del Vecchio, who holds a 62% stake in the Italian glasses maker, has agreed to a deal whereby his Delfin vehicle will end up with 31% to 38% of the merged EssilorLuxottica.

Subject to approval by its shareholders, the French lens maker will issue new shares on the basis of the exchange ratio of 0.461 Essilor shares for one Luxottica share, implying roughly a 5% discount based on Friday’s closing prices.

Then Essilor will make a mandatory public exchange offer to acquire all of the remaining issued and outstanding shares of Luxottica pursuant to the same exchange ratio and with a view to delist Luxottica`s shares.

Analysts said the deal solves Del Vecchio succession and corporate governance problems, as he has five children.

"The marriage between two key companies in their sectors will bring great benefits to the market, for employees and mainly for all our consumers," he said in a statement.

The merger is expected to release synergies of between €400-600m.

Analysts at Bryan Garnier said the synergies would come from the integration of the supply chain infrastructure and manufacturing footprint but more importantly, from distribution and cross-selling opportunities, as Essilor offers exposure to emerging markets and Essilor gains further penetration within Luxottica’s retail chains.