MILAN: Luxottica Group SpA, the world’s largest maker of eyewear including Ray-Bans, has agreed to merge with French rival Essilor International SA, the Financial Times reported, creating a combined company with about US$16bil in revenue.Leonardo Del Vecchio, Luxottica’s founder, will become the single largest shareholder with a stake of about 30 percent, in a deal that values the combined companies at 50 billion euro (US$53bil), the newspaper reported, citing unidentified people with direct knowledge of the agreement.The deal creates a branded goods giant with a market value that rivals the second-biggest luxury maker Hermes International.Milan-based Luxottica, which also makes frames for luxury brands such as Armani, Chanel, and Prada, has a market value of about 24 billion euros as of Jan. 13, compared with about 22 billion euros for lens maker Essilor. Luxottica is also developing voice-activated glasses that coach cyclists and runners.“This is a merger where they will be able to complement each other and create economies of scale on the supply chain,” said Catherine Lim, a Bloomberg Intelligence analyst.“Luxottica is a licensee of major branded eye-wear while Essilor has been more focused on making lenses.”Luxottica increasingly competes with large luxury players such as Kering, in a global eyewear industry worth about US$121bil last year, according to data from Euromonitor.The company’s expansion into lenses is attractive amid rising consumer demand and as the segment offers high margins, according to Bloomberg Intelligence.A spokeswoman for Essilor, which is working on smart glasses as well, had no comment when reached outside business hours. Luxottica representatives could not be immediately reached for comment.Demand for eyewear is expanding in emerging markets with more than 2.3 billion people in Asia, Africa and Latin America needing optical frames, according to Exane BNP Paribas.The two companies have been on a “collision course,” Exane said in a note in October as Luxottica moves into lens manufacturing while Essilor advances into frames and acquires control of online eyewear retailers. Lens manufacturing will be a big deal for Luxottica as it makes it independent for sun and prescription lenses, it said.Luxottica announced last March it will seek to accelerate growth by investing more than 1.5 billion euros over three years.Del Vecchio, Luxottica’s chairman and Italy’s second-richest person, will be executive chairman of the merged company, while Essilor chairman and chief executive Hubert Sagnieres will become executive vice chairman, the FT reported.The deal, due to be announced before the market opens Monday, will create a company with about 130,000 employees, according to the FT report. - Bloomberg

Source: The Star January 16, 2017 04:17 UTC