EssilorLuxottica tensions exposed as executives fall out

Tensions at the top of glasses company EssilorLuxottica burst into the open on Thursday when the group’s Italian executive chairman and its French vice chairman accused each other of plotting to take control of the combined group.

France’s Essilor and Italy’s Luxottica merged last October, creating the world’s largest eyewear maker in a 54 billion euro (46.9 billion pounds) deal.

The two groups were supposed to have equal weighting in the leadership of the combined company but they now accuse each other of trying to gain the upper hand, the latest example of squabbles between France and Italy over business partnerships .

In an interview in French newspaper Le Figaro published on Thursday, Leonardo Del Vecchio, the Italian founder of Luxottica and now executive chairman, was quoted as saying Hubert Sagnieres - the French executive vice chairman - listened only to himself.

Del Vecchio, who is the group’s largest shareholder, accused Sagnieres of attempting a power grab and said the 400-600 million euros of cost-savings that the merger was expected to yield had fallen behind schedule.

Sagnieres hit back with a statement accusing his chairman of a “de facto attempt to take control of the new group, without any premium offered to shareholders.”

The dispute sent shares in EssilorLuxottica down 6.5 percent by 1240 GMT, among the worst performers on both the Paris and broader European markets.

ARGUING ACROSS THE ALPS

The boardroom bust-up left investors and analysts aghast.

“This declaration of internal war can only be damaging to the company,” said Gregoire Laverne, fund manager at Roche Brune Asset Management, which has decided against investing in EssilorLuxottica.

Del Vecchio, 83, had previously irked the French side by apparently trying to earmark his right-hand man Francesco Milleri for the chief executive’s role. The group has just launched the search for a CEO to be appointed by the end of next year.

With the division of power unclear, analysts say tensions risk undermining the integration process at the group, whose stock has fallen around 10 percent so far in 2019 while Paris’ benchmark CAC-40 index has gained nearly 15 percent.

“Investors continue to recognise the industrial logic behind the deal, while remaining concerned around the clear differences between the two more senior execs within the group,” wrote brokerage Jefferies.

“Understandably, the critical unknown is just how deep this fracture runs between the two parts of the enlarged group,” added Jefferies, which has a “hold” rating on the stock.
France and Italy have had previous disputes concerning companies, while there have been diplomatic rifts between the Paris and Rome governments this year, which led to France briefly recalling its ambassador to Rome.

French media conglomerate Vivendi is involved in a boardroom battle at Telecom Italia, in which it has a 24 percent stake, and Vivendi also has a pending lawsuit with Mediaset.