The attempt by GrandVision's founding shareholders to acquire a blocking minority interest in the group with the help of PAI has ended up in failure. Although PAI's public bid for GrandVision at €21 a share finished on Sept. 17, the share price has since remained higher than before, around a level of €22.00-22.50, in low trading, indicating that many investors are holding their shares in expectation of a possible new bid, this time from HAL Investments, at a higher price.

HAL, the Dutch investment company that controls Pearle Europe, further raised its stake in GrandVision during PAI's bid, last reaching on Sept. 11 a declared level of 32.9 percent of its equity and 28.94 percent of the votes, after purchasing its shares at between €21.28 and €23.00. That's just below the 33.33 percent threshold that would force HAL to launch a bid for all the remaining shares, and considering the fact that HAL is a public company, it seems unlikely that it would hold more through institutional investors who may have acquired shares in its behalf. HAL continued to state on Sept. 11 that it doesn't plan ?at this stage? to acquire control of GrandVision, to make a bid for it or to appoint any directors, although it has become by far the largest single shareholder in the French group. Our guess is that it may want to let the dust settle for a while before going any further.

On the other hand, by Sept. 17, Euronext Paris had received only 2,891,908 GrandVision shares in response to PAI's bid, representing 12.38 percent of the equity, and they are being returned to their holders. Together with the shares tendered by the group's founders, they amounted to 35.28 percent of the equity, well short of the 66.66 percent minimum level required for the successful completion of PAI's bid.

GrandVision's management has made no official comment on the latest developments, except to say that it's back to carrying out its business as usual. There have apparently been no direct contacts yet between them and representatives of HAL since GrandVision informed HAL politely about PAI's bid on July 23, a few minutes after its launch.

HAL and Pearle Europe have declined to make any other further public comments, too. In general, HAL seems unlikely to make a hostile bid for the French company, without involving the management, judging from the history of its recent acquisitions in the European optical retail sector. On the other hand, their attitude may or may not be different in this case. France, the UK and Switzerland are now the only major European countries where Pearle Europe has no presence yet. After getting the Swedish Monopoly Commission's go-ahead for its investment in Synoptik this week, Pearle Europe controls 1,450 optical stores in 12 other European countries.

Pearle Europe's relative hands-off attitude and its strategy may or may not change in view of an imminent change of management. Mel Groot, the Dutch executive who has been running Pearle Europe lately, with a minority stake in the company, is moving next Oct. 15 to Monte Carlo to join HAL's board of management. Effective next Jan. 1, the new CEO of Pearle Europe will be another Dutchman, Ronald van der Vies, who has been running its Apollo Optik chain in Germany with a strong hand for several years. A German executive Theo Kiesselbach, became general manager of Apollo last Dec. 1.

GrandVision's founding shareholders have repeatedly stated in the last few months that their shares are not for sale, at least for the moment, partly because the share price has been depressed lately and could be worth more in about 5 years' time. They have led GrandVision to buy back and cancel ordinary shares in order to raise the percentage that they own in the company. They have backed PAI's proposal because it would have given them a blocking minority stake, allowing them to fend off a potential hostile takeover from Pearle Europe, Fielmann or some other foreign group.

Speculating that one of these foreign interests or PAI or some other investors would propose to pay a higher price sooner or later for GrandVision, and arguing that the price offered by PAI was fair but not generous, several financial analysts recommended to their clients that they should hold on to their shares until at least Sept. 5, the deadline for the presentation of a counter-bid. After that deadline passed and before the expiration of PAI's tender offer, Daniel Abittan, co-founder and CEO of GrandVision, sent out a public message to the company's shareholders and to the then hesitant hedge funds, encouraging them to accept PAI's offer.

Abittan indicated in a certain way that they could not expect a higher valuation until about 5 years from now. He noted that the business development model followed by GrandVision's current management calls for a return on investment of about 5 years for its stores and that this probably led some foreign institutional investors to pull out recently. In the last 3 years their combined shareholdings have declined from 30 to 18 percent of the equity, Abittan noted.

The management recently indicated that it doesn't plan any major new acquisitions. It looked at Carrefour Optique, which was subsequently acquired by Alain Afflelou at a relatively high price. It has no interest for another French chain of optical stores, Tati Optic, which is now more or less officially for sale at a reported price of €18 million, partly because it's only a network of franchises.