On Monday, January 16th, eyewear juggernaut Essilor announced that it had reached an agreement for an industry mega-deal. The company will merge with Luxottica, with a transaction value of $49 billion, to form a new entity named EssilorLuxottica.
Both Essilor (est. 1849) and Luxottica (est. 1961), design, build, and distribute optical lenses and frames. Luxottica owns popular brands Oakley, Ray-Ban, and many others. The two companies differ in that Essilor is a wholesale distributor and Luxotica has retail stores.
The combined company is estimated to have annual revenues in excess of $16 billion, and operate in over 150 countries. Based on 2015 figures, Essilor estimates the combined net EBITDA to be over $3.7 billion, and mid to long-run cost synergies of over $430 million.
Under the terms of the deal, Luxottica’s majority shareholder, Delfin, will exchange its 62% stake in Luxottica for Essilor shares. Essilor will then exchange its shares for the remaining outstanding shares of Luxotica. The exchange ratio will be .461 Essilor share per 1 Luxottica share. Essilor will become the holding company, renamed EssilorLuxottica.
In its press release, Essilor stated that the new company will “benefit from a robust balance sheet and strong cash flow generation, giving it financial flexibility to invest in its future growth both internally and externally.” Essilor CEO Hubert Sagnieres expressed his confidence in the deal during a call with analysts and investors; “for the first time we will bring lenses, frames, and distribution under one single roof… [and] equip our company extremely well to serve an inspiring purpose.”
The deal is proposed to close in the second half of fiscal year 2017.