Eyewear giants Luxottica and Essilor merged, creating a €46 billion eyewear empire

Eyewear giants Luxottica and Essilor merged, creating a €46 billion eyewear empire

 

According to Reuters,

 

Luxottica, Italy's top eyewear manufacturer, and Essilor, France's leading manufacturer of ophthalmic lenses, have agreed to merge for a combined group with a total market capitalization of €46 billion

 

The transaction is one of the largest cross-border transactions in Europe.

 

Luxottica owns the well-known Ray Ban and Oakley,

 

The two companies are joining forces to integrate the Group's supply chain in response to the ever-changing eyewear industry.

 

Leonardo Del Vecchio, the 81-year-old founder of Luxottica, will become the largest single shareholder in the consolidated group and will serve as executive chairman of the consolidated group.

 

Control 31% of the voting power.

 

Hubert Sagnieres, Chairman and Chief Executive Officer of Essilor, will become Executive Vice Chairman.

 

The merger of the two giants is based on an equal footing, with Luxottica having a market capitalization of around €24 billion,

 

Essilor has a market capitalization of around 22 billion euros.

 

In 2015, the two companies generated revenues totaling almost 16 billion euros.

 

The combined empire will be listed on the Paris Stock Exchange.

 

An important reason for the merger of the two companies is the fast-changing and promising eyewear market.

 

According to Grand View Research, a U.S.-based market consulting firm,

 

In 2015, the eyewear market developed rapidly, with a total value of $100 billion.

 

Of the 7.3 billion people in the world today, 63% need vision correction.

 

But only 1.9 billion people have purchased contact lenses or undergone vision correction surgery.

 

With an aging population and a growing awareness of eye care and vision issues,

 

In regions such as Asia, Africa and Latin America, the demand for eyewear will continue to increase.

 

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In 2017, in addition to optical glasses, the popular frame brand ranking,

 

Sunglasses have also become more marketable.

 

The middle class is emerging, and they are increasingly concerned about their health.

 

Due to the powerful UV and blue light sunglasses are becoming a must-have for the emerging middle class.

 

May Ling Tham, Head of Personal Accessories & Eyewear Research at Euromonitor, said,

 

The long-term outlook for the eyewear industry is "optimistic", with a CAGR of 2.5% from 2015 to 2020.

 

The merger is to better integrate the upstream and downstream industrial chains.

 

Luxottica has been plagued by turbulent management and poor performance

 

In January 2016, its third CEO left and three CEOs were removed within two years.

 

And because of the terrorist attacks in Europe and the recession of tourism,

 

As a result, the outlook for the retail sector was bleak, and Luxottica lowered its revenue forecast for 2016 at one point.

 

While Luxottica still firmly holds the position of the leader of the eyewear industry,

 

The annual income is more than 7 times that of the second-ranked Safilo, but in times of peace,

 

It is hoped that a partner will be brought in to strengthen its position.

 

Essilor happens to be an excellent partner, and the products of both companies have their own characteristics.

 

Essilor primarily focuses on the manufacture of ophthalmic lenses.

 

Overall, Essilor is the upstream supplier for the manufacture of finished eyewear Luxottica.

 

In terms of optical lens products, Essilor has achieved gratifying results in the past two years.

 

For the whole of 2015, the year-on-year growth was 17.5%.

 

For Luxottica, there was a lack of a department within the company that focused on the manufacture of optical ophthalmic products.

 

The combined combination will allow you to take advantage of Essilor's cost and technology advantages in lenses when manufacturing eyewear.

 

Create synergies in terms of cost.

 

In addition, Essilor can supply lenses to other eyewear manufacturers,

 

Earn extra profits for the group.

 

The merger of the two eyewear giants is effectively a vertical integration, with Luxottica combining the company's value chain with that of its supplier, Essilor.

 

By reducing the duplication of functions, integrating the different levels of business in the production process,

 

to reduce the company's fixed costs, increase profits, and rapidly increase market share.

 

The merged glasses empire will master all links in the glasses industry chain.

 

Including lens technology, lens supply, eyewear design, eyewear production

 

Economies of scale are formed, and with the increase of output, the long-term average total cost shows a downward trend.

 

Moreover, if the entire production industry chain is mastered, the enterprise has the right to set its own price.

 

The combination of the two is to jointly make the cake of the industry bigger to obtain greater resources and markets.

 

Erect barriers for their opponents or new entrants.

 

Perhaps in terms of technology, in the future, we can also expect the field of lenses and frames to be combined.

 

The eyewear industry joins the well-known brand of glasses frames.