Differences Emerge Around Management and Governance of EssilorLuxottica

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CHARENTON-Le-Pont, France and LUXEMBOURG—The Essilor and Luxottica merger was formally completed and closed last October. However, differing views about future management and governance of the combined company, EssilorLuxottica (ESLX.PA), emerged in Europe mid-week, as Leonardo Del Vecchio, executive chairman of EssilorLuxottica and chief of Luxottica and Hubert Sagnieres, executive vice chairman of EssilorLuxottica and head of Essilor, each issued separate statements raising questions about how the leadership transition and control of the combined companies will move forward.

Delfin (the holding company controlled by Del Vecchio) issued a statement on March 20 that said, in part, “Delfin... has identified certain conducts of some representatives of Essilor which would require, instead, prompt and appropriate action by the Board, as they contradict the duty of loyal cooperation and good faith which is due under the 2017 Combination Agreement between Essilor and Delfin and is essential to the proper functioning of the company’s governance. Such conducts constitute, in Delfin’s opinion, a clear violation of the Combination Agreement and of the company’s governance rules.”

On March 21, a statement distributed by Sagniere's office said, “Delfin and its representatives published on Wednesday serious and false accusations regarding the Group’s governance and management, accusations to which the Board of Directors had already responded, especially regarding the respect of the initial agreements. This approach, which is contrary to the company’s social interest, is detrimental to the company and to all its shareholders.”

The disagreement relates to previously agreed-upon governance matters as well as an ongoing search for a new chief executive officer to run the combined companies and whether Delfin is moving to “change the balance of powers” that had been agreed to in the merger negotiations, a claim that Delfin strongly disputed, saying that any “prise de controle,” whether or not “rampante” or de facto, is out of the question.

The Delfin statement added, “In reality, at this stage, the Essilor representatives have deliberately prevented Delfin from exercising its equal share of managerial authority resulting from the agreed ‘equal powers’ governance principle. Delfin will continue to comply,and to demand compliance by the Essilor representatives, with the Combination Agreement and with the EssilorLuxottica’s governance rules, on the basis of which Delfin, the Essilor shareholders and the Luxottica shareholders have agreed to enter into the business combination between Luxottica and Essilor International.”

In the his statement, Sagnieres said the evolution of EssilorLuxottica's future governance has been discussed by the board of directors for several months, and Sagnieres has focused on “ensuring compliance with the merger agreements and a governance in line with that of a large international public company,” and launching the search for a new chief executive and “aiming for an appointment as soon as possible, in accordance with international best practices.”

Delfin also noted in its statement that it “reserves to take such actions as it will deem necessary or appropriate to protect its interest along with the interest of EssilorLuxottica and its stakeholders."

At presstime, no other comment was issued by EssilorLuxottica, but VMAIL will continue to report on any additional developments on this story.