MILAN—In a statement on its website posted late yesterday, Marcolin S.p.A. said that LVMH Moet Hennessy Louis Vuitton (LVMH:PA) the France-based global luxury goods group, will set up a design and manufacturing joint venture with the group.

Marcolin's statement said it would begin to make eyewear for LVMH's Celine and Louis Vuitton brands starting in 2018, aiming to become the French group's "preferred partner in the eyeglass business."

LVMH will own 51 percent and Marcolin the rest of the proposed joint venture. As part of the deal, LVMH will subscribe to a reserved €22 million ($24 million) capital increase at Marcolin, taking a stake of around 10 percent.

Marcolin's statement read, "The Company has today entered into a joint venture agreement with LVMH pursuant to which, subject to certain conditions and approvals, the proposed JV will, starting in 2018, design and manufacture eyewear for the Celine and Louis Vuitton brands, with aim of becoming, in the future, the preferred partner of LVMH in the eyewear business. LVMH and the Company will control, respectively, 51 percent and 49 percent of the share capital of the proposed JV. In total, we estimate our equity contributions to the start-up costs, capital expenditures and working capital requirements of the JV will be between €20 million and €25 million over the course of the next four to five years, of which we expect to fund approximately €7 million in 2017.

“Pursuant to the JVA, the capital requirements of the JV will be funded as and when required by (i) direct or indirect pro rata equity contributions by Marcolin and LVMH and/or (ii) debt financing incurred by the JV for a maximum amount of €45 million (or 50 percent of the JV’s financing needs), which is expected to be non-recourse with respect to Marcolin and its subsidiaries. Marcolin will also provide distribution and transitional and other support services required in connection with setting up the JV,” according to Marcolin’s statement.

Marcolin said that its board approved the refinancing of the existing notes through the issuance of new senior secured non-convertible notes up to a total amount of €250 million, expected to mature in 2023. Additional funds for the refinancing will be available through drawings under a new super senior revolving credit facility, which will be available for borrowings up to an aggregate principal amount of €40 million and amounts expected to be received through a capital increase of €21.9 million in connection with the formation of the proposed joint venture.

“The capital increase is contingent on the approval of the proposed JV by European Union anti-trust authorities and other standard closing conditions, which may not occur. Additionally, the partial repayment of certain of the Company’s short and medium term financings will not occur immediately upon the issuance of the notes, and we expect such repayments will be made, in part, using amounts received from the capital increase,” the Marcolin statement said.

There was no further comment from Marcolin or LVMH this morning, although there had been previously published reports citing sources in the financial markets about a pending agreement between the two companies. VMail will provide further details as they become available.