EssilorLuxottica and Delfin Sign Settlement Agreement Tied to Governance Issues

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CHARENTON-LE-PONT, France—EssilorLuxottica (Reuters: ESLX.PA) announced this morning that EssilorLuxottica and Deflin S.a.r.l. have reached a settlement agreement to overcome outstanding governance issues and “set the basis for a renewed start of profound collaboration between Essilor and Luxottica.” The agreement, which ends weeks of wrangling over the newly merged company's governance, settles any existing dispute among the parties, according to the announcement. EssilorLuxottica said its board has unanimously supported and approved this agreement, which is “aimed at immediately making the group’s structure more efficient and effective from an operational standpoint.”

The equal-powers governance, which was set forth in the “Combination Agreement and the Board Rules” at the core of the companies’ combination last year, will remain in place until the shareholders’ general meeting to be called in 2021 to approve the financial statements for the year ended Dec. 31, 2020, the announcement noted.

In addition, according to the agreement announced Monday:

• Leonardo Del Vecchio, executive chairman of EssilorLuxottica, and Hubert Sagnieres, executive vice chairman, have empowered Francesco Milleri (deputy chairman and CEO of Luxottica Group) and Laurent Vacherot (CEO of Essilor International) with the responsibility to develop and implement the EssilorLuxottica strategy and integration process, accelerating the simplification of the new group by integrating the two operating companies within the next 12 to 24 months.

• Milleri and Vacherot approved the appointment of key executives for the group’s central functions.

• Vacherot has been appointed as a director of EssilorLuxottica, replacing Bernard Hours, who has asked to be relieved of his office. He will also become a member of the board's strategy committee.

In the announcement, the company’s board confirmed the search for a new CEO, and Milleri and Vacherot have informed the board that they are not candidates for this position.

Management and governance issues for the merged Essilor and Luxottica companies first emerged publicly in March, as VMAIL reported.

As a result of this new agreement, all existing claims are being waived and legal proceedings will be terminated, including the request for arbitration filed by Delfin before the International Court of Arbitration of the International Chamber of Commerce on March 27, 2019. (Delfin, a holding company controlled by Del Vecchio, is the largest shareholder in EssilorLuxottica.)

In light of this agreement, the Essilor employee shareholder group Valoptec has decided that it will withdraw the proposal submitted on April 18 for the appointment, at the shareholders’ meeting (scheduled for Thursday, May 16), of one additional director of EssilorLuxottica and will vote against the proposals submitted by certain institutional investors for the appointment of two additional directors, the announcement noted. The representative of Valoptec at the board of EssilorLuxottica will integrate the strategic and the integration committees of the company.

The company’s board also reaffirmed its recommendation that shareholders later this week vote against “all the remaining proposed additional resolutions which, if approved, would result in a clear breach of the Combination Agreement and in a potential disruption for the activities of the board.”

Leonardo Del Vecchio, executive chairman of EssilorLuxottica, said in the announcement that he is “very pleased” with the outcome. He added. “The industrial rationale of the combination is even stronger when looking at all the opportunities raised during the meetings of the Integration Committee. Today, respecting the equal power and the Combination Agreement, we have found a solution to better execute such strategic combination.”

Hubert Sagnieres, executive vice chairman of EssilorLuxottica, said in the announcement, “With these decisions driving to a more unified company, EssilorLuxottica is well positioned to accelerate its growth in order to achieve its mission: to help people around the world to see more, be more and live life to its fullest by addressing their evolving vision needs and personal style aspirations.”