Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

EssilorLuxottica tensions exposed as executives fall out

Published 21/03/2019, 13:11
Updated 21/03/2019, 13:11
© Reuters.  EssilorLuxottica tensions exposed as executives fall out

© Reuters. EssilorLuxottica tensions exposed as executives fall out

By Sudip Kar-Gupta and Blandine Henault

PARIS (Reuters) - Tensions at the top of glasses company EssilorLuxottica burst into the open on Thursday when the group's Italian executive chairman and its French vice chairman accused each other of plotting to take control of the combined group.

France's Essilor and Italy's Luxottica merged last October, creating the world's largest eyewear maker in a 54 billion euro (46.9 billion pounds) deal.

The two groups were supposed to have equal weighting in the leadership of the combined company but they now accuse each other of trying to gain the upper hand, the latest example of squabbles between France and Italy over business partnerships .

In an interview in French newspaper Le Figaro published on Thursday, Leonardo Del Vecchio, the Italian founder of Luxottica and now executive chairman, was quoted as saying Hubert Sagnieres - the French executive vice chairman - listened only to himself.

Del Vecchio, who is the group's largest shareholder, accused Sagnieres of attempting a power grab and said the 400-600 million euros of cost-savings that the merger was expected to yield had fallen behind schedule.

Sagnieres hit back with a statement accusing his chairman of a "de facto attempt to take control of the new group, without any premium offered to shareholders."

The dispute sent shares in EssilorLuxottica down 6.5 percent by 1240 GMT, among the worst performers on both the Paris and broader European markets.

ARGUING ACROSS THE ALPS

The boardroom bust-up left investors and analysts aghast.

"This declaration of internal war can only be damaging to the company," said Gregoire Laverne, fund manager at Roche Brune Asset Management, which has decided against investing in EssilorLuxottica.

Del Vecchio, 83, had previously irked the French side by apparently trying to earmark his right-hand man Francesco Milleri for the chief executive's role. The group has just launched the search for a CEO to be appointed by the end of next year.

With the division of power unclear, analysts say tensions risk undermining the integration process at the group, whose stock has fallen around 10 percent so far in 2019 while Paris' benchmark CAC-40 index has gained nearly 15 percent.

"Investors continue to recognise the industrial logic behind the deal, while remaining concerned around the clear differences between the two more senior execs within the group," wrote brokerage Jefferies.

"Understandably, the critical unknown is just how deep this fracture runs between the two parts of the enlarged group," added Jefferies, which has a "hold" rating on the stock.

France and Italy have had previous disputes concerning companies, while there have been diplomatic rifts between the Paris and Rome governments this year, which led to France briefly recalling its ambassador to Rome.

French media conglomerate Vivendi (PA:VIV) is involved in a boardroom battle at Telecom Italia (MI:TLIT), in which it has a 24 percent stake, and Vivendi also has a pending lawsuit with Mediaset.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.