March 1, 2018 / 3:42 PM / in 4 months

EU, U.S clear Essilor's 48 billion euro merger with Luxottica

PARIS/BRUSSELS (Reuters) - European and U.S. competition regulators on Thursday approved the 48-billion-euro ($58 billion) merger of Italian eyewear maker Luxottica (LUX.MI) and French lens manufacturer Essilor (ESSI.PA), sending shares in both companies higher.

FILE PHOTO: The Luxottica name is reflected in a pair of sunglasses in this photo illustration taken in Rome February 4, 2016. REUTERS/Alessandro Bianchi/Illustration/File Photo

The proposed tie-up between Luxottica, which owns brands including Ray-Ban and Oakley, and Essilor, which sells lenses under the Varilux brand, is aimed at taking advantage of expected strong demand for prescription spectacles and sunglasses as populations age globally.

“We’ve received feedback from nearly 4,000 opticians in a market test in Europe that Essilor and Luxottica would not gain market power to harm competition,” EU Competition Commissioner Margrethe Vestager said, approving the deal without conditions.

The Federal Trade Commission in the United States gave its green light soon after.

Essilor shares closed up 5.3 percent. The announcements came hours after the world’s largest maker of ophthalmic lenses reported higher sales but weaker profit margins.

Reuters reported in December that the deal would be cleared by the European Union. The approvals from Brussels and Washington mean Essilor and Luxottica are now waiting for the go-ahead from regulators in China.

Rivals and some opticians have voiced concern that the merged entity might persuade opticians to buy eye wear and lenses as a package.

Speaking earlier about progress towards the merger, Essilor’s Chief Operating Officer Laurent Vacherot said: “We are serene,” repeating that the deal was expected to close in the first half of 2018.

MANAGEMENT PLANS

Announcing its annual results, Essilor said it was targeting revenue growth of around 4 percent in 2018. Revenues rose 3.1 percent on a like-for-like basis to 7.5 billion euros last year, partly helped by higher sales in North America.

A measure of profitability stripping out the cost of sales and operating expenses stood at 18.2 percent of revenue in 2017, down from 18.6 in 2016 and is forecast at a minimum of 18.3 percent in 2018. The company gave few further details.

“Key triggers for both companies’ share prices remain deal clearance and news flow from antitrust authorities,” Raymond James analysts said in briefing note. “The full-year 2018 outlook is slightly below our forecasts.”

Investors are waiting for more details on the management structure following the merger.

Essilor Chief Executive Hubert Sagnieres, who is set to share powers with Luxottica’s chairman Leonardo Del Vecchio for an initial three years, said in December the merged group would appoint a new CEO.

Vacherot said Essilor would keep pursuing its strategy of bolt-on acquisitions in 2018, particularly in China and India.

Luxottica, which has been restructuring since 2014, forecast on Monday steady growth in sales and profits this year. Its shares rose 5.2 percent.

Editing by Richard Lough

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