Optical behemoth EssilorLuxottica has reached an agreement to acquire a 76.72% stake in global eye care retailer GrandVision following talks last month. (News, 26.7.19)
It has received an ‘irrevocable commitment’ from HAL Holdings, controlled by the Dutch Van der Vorm family, to sell its shares to the Franco-Italian company.
Through the acquisition, EssilorLuxottica will expand its retail platform by adding more than 7,200 stores globally, over 37,000 employees and €3.7bn in annual revenue.
The company will hope that its acquisition of GrandVision, who currently have 150 million customers, will provide it with a stronger retail outlet in which to sell its products.
However, the transaction is subject to several closing conditions, including regulatory approvals, consultation procedures and debt targets.
If finalised as planned, EssilorLuxottica will buy the shares at €28 per share, with an increase of 1.5% to €28.42 if the transaction does not happen within 12 months. The transaction is expected to be completed in between 12 and 24 months.
After the closing the of deal, the frame and lens producer will launch a mandatory public offering for all outstanding GrandVision shares.
Executive chairman of EssilorLuxottica Leonardo Del Vecchio said: ‘With GrandVision we will be able to develop our retail network, finally extended throughout the geographies, and fully enable our multichannel and digital platforms. We will raise the quality of in-store experience for products, brands and services for the benefit of all consumers and our wholesale customers.’
Executive vice chairman of EssilorLuxottica Hubert Sagnières argued that the takeover represented a ‘milestone in our vision of reshaping the optical industry’ and that together the companies will ‘have an even stronger voice to champion better vision everywhere in the world’.
For Eyes in the USA
GrandVision
GrandVision, which owns the Vision Express brand in the UK and its nearly 600 practices, was bought by HAL Holdings in 2005. It currently operates in more than 40 countries, with stores run under local retail banners in their respective nations.
In 2018, its revenue increased by 10.3% and its earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 6.2%.
At the time, GrandVision CEO Stephan Borchert said: ‘2018 represents a transitional year and marks the beginning of an exciting journey to drive GrandVision through its next phase of growth.’
In agreeing to buy GrandVision, EssilorLuxottica has valued the retailer at as much as €7.2bn. GrandVision went public in 2015 and was valued at around €5bn, according to Bloomberg.
EssilorLuxottica planned to bridge finance the acquisition: ‘EssilorLuxottica has obtained, subject to customary conditions, committed bridge financing for the transaction from reputable global financial institutions of approximately €8bn and plans to refinance through debt and equity, or equity-like instruments, in the amount of up to €2bn,’ said the company.
Borchert commented: ‘The future integration of GrandVision with EssilorLuxottica brings new opportunities to GrandVision’s business, its well-established retail banners, stores, employees and all our stakeholders.
‘EssilorLuxottica’s interest in joining forces with GrandVision is a clear recognition of GrandVision’s successful strategy, our state-of-the-art retail platform and our people. We look forward to joining forces with EssilorLuxottica in what will be an exciting new chapter ahead.’
The deal, however, is not yet complete. It is contingent on the approval of various antitrust authorities, consultation procedures with employee representative bodies and is conditional upon GrandVision’s net debt at closing being less than €993m. Its net debt at the end of 2018 was €743m.
If there has been a failure to satisfy the relevant competition authorities by July 30 2021, or if there has been a breach of the agreements or its warranties, then EssilorLuxottica shall pay a termination compensation of €400m to HAL Holdings.
Alternatively, if the agreement is terminated as a result of GrandVision’s net debt being too high, the Dutch company will pay EssilorLuxottica a termination charge of €100m.
General d'Optique in France
Smooth transitions
In order to facilitate a successful acquisition, GrandVision has agreed to support the takeover. Crucially, it has agreed to cooperate with EssilorLuxottica in connection with the antitrust clearance process by offering ‘certain remedies in order to obtain antitrust clearance’.
It also offered assistance in terms of the required filings for the mandatory public offering post-deal, the financing of the transaction, consultation procedures and even accepted certain restrictions to its conduct on business until closing.
‘In addition, GrandVision and EssilorLuxottica have each agreed to abstain from performing any actions that would reasonably be expected to materially prejudice or render more difficult closing of the transaction,’ added EssilorLuxottica.
Borchert and GrandVision’s CFO Willem Eelman will stay in their roles to help ease the company into its new relationship with the global giant EssilorLuxottica.
‘EssilorLuxottica has strong respect and appreciation for the work done by the current management team of GrandVision and is pleased that Stephan Borchert and Willem Eelman have expressed their commitment to remain as CEO and CFO of GrandVision post-closing of the transaction and the subsequent mandatory offer,’ said a company statement.
Extending dominance
Merged in 2017, Essilor and Luxottica united their areas of expertise to form a globally-dominant eyewear company that made over €16bn in revenue in 2018. The deal with strengthen EssilorLuxottica’s position mainly in Europe where GrandVision is most prominent. Even as recently as last week it acquired 100% of McOptic, the third largest optical retailer in Switzerland.
Instrumentarium in Finland
Furthermore, with the US retail chain For Eyes being part of GrandVision’s portfolio, it will also help tighten its grip on the US market.
‘Following the merger between Essilor and Luxottica, we definitely needed to extend our footprint in Europe, where we did not have enough of a retail presence,’ Sagnières, the former Essilor CEO and executive vice-chairman of the combined group is reported to have told the Financial Times. ‘The next step is to continue this around the world, where we don’t have enough distribution.’
‘GrandVision will have the resources it needs to grow and maintain its reputation in the optical retail space and will benefit from the access to EssilorLuxottica’s multiproduct and multibrand portfolio,’ said a EssilorLuxottica statement.
‘In the planned combined company, the GrandVision organization will operate EssilorLuxottica’s ophthalmic retail activities in Europe, the Middle East and Africa, while the current EssilorLuxottica organization will operate the retail networks in Latin America and North America,’ it added.
Meanwhile, the company has said that it does not ‘currently envisage redundancies of any significance’ as a result of the takeover and that the acquisition’s validity and rationale was ‘not based on workforce reduction’.
The first years of EssilorLuxottica’s young history have been marred by disputes at the very top over who will run the new company.
Disagreements between the heads of the previously separate entities have been played out in a very public fashion, causing its share price to suffer.
It will hope the acquisition on GrandVision and an agreed position on choosing a new head will usher in a new period for the company. For now, it has a crucial need to satisfy the conditions of the transaction. If it does, it will have asserted further dominance over the optical industry.
Deal in numbers:
GrandVision valued at: €7.2bn
• Stores added: 7,200
• Staff acquired: 37,000
• GrandVision operations: 40 countries
• GrandVision Annual Revenue: €3.7bn
• GrandVision share price: €28
• Termination charge: €100-400m
