Yahoo Finance Ray-Ban Billionaire Displays Dealmaker’s Instinct
(Bloomberg Opinion) -- The maker of Ray-Ban sunglasses, EssilorLuxottica SA, is reconsidering its agreed upon 7.3 billion-euro ($8.8 billion) purchase of optical retailer GrandVision NV, Bloomberg News reported on Wednesday. Shares in GrandVision fell as much as 5% early Thursday, before recovering slightly. Those of EssilorLuxottica hardly moved.
This shows who has the most to lose if a transaction falls apart, and it’s not Luxottica’s billionaire founder Leonardo Del Vecchio.
Del Vecchio’s deliberations echo those of another billionaire: Bernard Arnault seeking to extract LVMH Moet Hennessy Louis Vuitton SE from its $16 billion purchase of Tiffany & Co. That luxury mogul eventually got a price cut. Expect to see the same here too. In fact, getting a snip might even be easier.
GrandVision is no household name like Tiffany. Yes, it has an optical retail presence in Europe that EssilorLuxottica lacks. But this may be less important as e-commerce — even in prescription glasses — has grown.
For Arnault, it was also hard to find trophy assets in the luxury industry that were unencumbered by a family shareholding. EssilorLuxottica will likely have other chances to make opportunistic acquisitions.
There is even a mechanism for the buyer to walk away: EssilorLuxottica could pay a 400 million-euro termination fee for a clean break, sparing each side from the kind of lengthy legal battle that Arnault faced in trying to dump Tiffany.
No doubt Del Vecchio is driven by the dealmaker’s instinct to exploit his target’s difficult situation. There’s no other obvious buyer waiting in the wings, and the reality is that EssilorLuxottica needs this deal less than Grandvision. Looking beyond the pandemic and toward a brighter future, there is still strategic logic to a tie-up — but not at a price set last year. EssilorLuxottica agreed in July 2019 to pay at least 28 euros per share. GrandVision’s current share price stands at about 25 euros.
The two sides are already in a legal row over access to information. EssilorLuxottica started court proceedings in July against GrandVision to find out how the company was managing through the Covid crisis. The group said the retailer failed to provide the details after repeated requests; GrandVision said it disagreed with its suitor’s demands. In August, a Dutch court ruled in favor of GrandVision, and EssilorLuxottica has since appealed. This could be seen as part of the overall negotiation over whether the deal should happen and at what price.
Arnault eventually got a discount on Tiffany. The stage is set for Del Vecchio to walk away with something similar. If that doesn’t pan out, there’s at least a clear route for the two sides to end their alliance without too much acrimony.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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