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Mar 28, 2019
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EssilorLuxottica deadlock set to drag on after arbitration request

Mar 28, 2019

A row over who is in charge at Ray-Ban maker EssilorLuxottica could drag on for two years or more after the recently merged group’s executive chairman filed an arbitration request after alleged violations of a power-sharing agreement.

Leonardo Del Vecchio - DR

French lenses producer Essilor and Italian frame manufacturer Luxottica merged last October, creating the world’s largest eyewear maker in a 54 billion euro (46.23 billion pounds) deal.

The two groups were supposed to have equal weighting in the combined company’s leadership under an agreement which expires in 2021, but they now accuse each other of trying to gain the upper hand.

EssilorLuxottica’s shares fell 2.7 percent by 1510 GMT on Thursday after the holding of Luxottica’s founder Leonardo Del Vecchio said it had filed an arbitration request with the Paris-based International Chamber of Commerce.

While there is no set duration for arbitration cases, it usually takes two years from when a request is filed to a ruling being issued. The defeated party can then appeal.

Del Vecchio’s Delfin holding said in a statement on Wednesday the deadlock within EssilorLuxottica’s board was hampering the integration process and planned synergies from the merger.

Del Vecchio, 83, has been engaged in a dispute with his French counterpart Hubert Sagnieres, who came from Essilor and is vice-chairman of the new entity.

Del Vecchio is EssilorLuxottica’s largest investor with a 31 percent voting stake, well above the 4 percent holding owned by Essilor’s employees.

An Italian source close to the situation said Del Vecchio, Italy’s second-richest man, was in no mood for compromise even if that meant leaving the combined group essentially paralysed until the end of the power-sharing accords in two years’ time.

“It’s war between the French and the Italians. All this risks blocking the planned synergies. It’s very bad for the stock. At one moment or another, one of the parties will have to take control,” said Jerome Schupp, fund manager at Geneva-based investment firm Prime Partners.
Prime Partners is steering clear of the stock, given the management problems within the company. The shares have fallen 12 percent over the last month.

Tensions have increased since last November, when Del Vecchio appeared to tap his right-hand man, Francesco Milleri, for the chief executive’s role, irking the French side.

The company has said it will appoint a CEO by the end of 2020. However, two sources told Reuters that the appointment of a head hunter to find the new company’s head, has been frozen.

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