As largely anticipated by industry observers, EssilorLuxottica’s annual general assembly marked the end of the dual governance era and saw Leonardo Del Vecchio reinforce his control over the merged group. Implemented in 2018, the merger between two global champions in their respective segments of the eyewear market was ruled until now by a two-year Business Combination Agreement (BCA) guaranteeing equal powers to both parties. It had been negotiated by the Italian entrepreneur and Hubert Sagnières, then CEO of Essilor International.
Since the sudden departure of Sagnières at the end of last year, executive functions have been shared equally between Francesco Milleri, protégé of Del Vecchio and CEO of Luxottica since 2017, and Paul du Saillant, the former chief operating officer of Essilor, who took the place of Sagnières last December. However, the planned expiration of the BCA agreement at last week’s general assembly shifted the balance of powers decisively to Del Vecchio’s side.
The 86-year old industry patriarch, who is EssilorLuxottica’s main shareholder with 32 percent of its capital through his Delfin investment company, strengthened his grip on the group by having Milleri finally appointed as its CEO. Du Saillant has been officially confirmed as n°2 in the group’s hierarchy in the role of deputy CEO. Both men have been working together for a few years already and are seen as complementary. Beyond the natural split of their roles between the frames and lenses segments, the Italian manager is expected to focus on the digitization and the DTC strategy of the group while the Frenchman would take charge of relations with opticians.
The board of directors with Del Vecchio at its helm was approved by the general assembly of shareholders on Friday. Reduced from a total of sixteen to fourteen members, it includes three Luxottica directors, two Essilor directors and two representatives of the group’s employees who will terminate their mandate in September. Other seats are held by seven independent directors, including one for Bpi France, an investment bank controlled by the French government.
The shift of powers within the group to the other side of the Alps is raising some concern among EssilorLuxottica’s 4,500 employees in France, leading three important trade unions to call for a strike just a few days ahead of the shareholders’ general assembly. One of their main points of concern is the risk of a transfer of EssilorLuxottica’s headquarters from its current location in Charenton, near Paris, to Milan.
According to a representative of the CFDT trade union, one of the newly adopted resolutions would allow this relocation without the shareholders’ approval. A spokesperson for EssilorLuxottica commented that the said resolution was simply an adjustment to a new French regulation and that such a transfer would be limited to the French territory.
The social discussions are taking place in the general context of the reorganization of the group’s production in France, which was first communicated in October last year, calling for the consolidation by 2024 of four laboratories and one distribution center into one single location. Essilor France announced just a few days ago that it would set up this new site in Wissous, a small town near Paris, relatively close to the company’s R & D center in Créteil and the current laboratory in Antony. It is well connected in terms of transportation and logistics.
The company has pledged to offer a job inside the group to all the employees of the production units that will be closed, in priority by offering them to relocate to the new Wissous location, and to maintain the number of industrial jobs in the country. The new site, in which EssilorLuxottica is reportedly investing €40 million, should regroup a total of 300 employees.
The end of the dual governance system at EssilorLuxottica should accelerate the transformation of the group and the realization of €300 million in costs savings as promised by 2023. It also comes just a few weeks before the deadline for the acquisition of GrandVision, the largest optical retail group in Europe. The transaction, which would further consolidate the vertical integration of the group, has been approved by the market regulators in Brazil, Chile, Colombia, Mexico, the U.S., and the European Union, leaving Turkey as the only country where it is still being reviewed. EssilorLuxottica and GrandVision are currently going through independent arbitral proceedings and have to confirm their agreement by July 31.