Luxottica has agreed to buy Tecnol in a deal valuing the leading Brazilian eyewear company at about €110 million. The acquisition enables Luxottica to reinforce its presence in a market with significant growth potential, where the Italian group has been already growing at an annual rate of more than 10 percent, and to obtain an efficient local manufacturing base.

The transaction is due to be completed at the beginning of 2012. Luxottica will initially buy 80 percent of the Brazilian company. It will purchase the remaining 20 percent stake over four years, through annual purchases of 5 percent of the equity, to be carried out at pre-determined prices.

Run by an entrepreneur of Italian origin, Sergio Carnielli, Tecnol posted sales of around €90 million in 2010 and has enjoyed an average annual growth of about 14 percent over the past three years. It has a portfolio of 15 brands, including house brands – such as Platini, Jean Monnier and Tecnol – and several brands that it licenses for the Brazilian market, such as Jean Paul Gaultier, Pierre Cardin, Playboy and United Colors of Benetton. It also sells two other brands – Forum and Turma de Monica – exclusively on the Brazilian market.

The acquisition is expected to help Brazil become one of Luxottica's top five wholesale markets. Tecnol's wholesale division serves about 15,000 doors in Brazil through a network of distributors and representatives.

The acquisition of Tecnol also provides Luxottica with a network of 90 optical retail stores operating under the Oticas banner in the state of São Paulo. Optica Iris, owned by the Grupo Tecnol, is the fourth-largest chain in the country with 110 locations at last count. It has been a major sales channel for Luxottica's products in Brazil recently.

Tecnol produces about 25 percent of the frames made in the country. Luxottica described Tecnol's manufacturing plant, located in Campinas in the state of São Paulo, as “highly efficient” and fitting “perfectly” with the group's global operations. Prescription frames and sunglasses represent 90 percent of the site's production. Over time, the share of sunglasses in the overall production is due to increase. On the other hand, Tecnol sources in China some of the frames and sunglasses it sells.

Having a local production base will enable the group to avoid heavy import duties and cut the red tape it faces when it imports products into Brazil. The acquisition is expected to reduce the time required to deliver products to clients by two-thirds. Due to the import duties and other taxes, the retail price of imported sunglasses is about 30-40 percent higher than in the rest of the world. In the long term, Brazil is expected to become Luxottica's manufacturing and logistics platform for the whole of Latin America.

Brazil is currently the group's most important emerging market for Luxottica, 50 percent larger than its business in China. The company recently opened its first Sunglass Hut stores in Brazil as well as in China, and indicated that the number of its Brazilian Sunglass Hut stores would reach 15 units by the end of 2012. Brazil was described as one of the best performing markets for the company in 2010, along with North America, Mexico, India, South Korea and Eastern Europe. The group has set a policy of becoming a “domestic” player in four countries: Brazil, China, Mexico and Turkey.

Even before the takeover of Tecnol, emerging markets were expected to represent 20 percent of Luxottica's total revenues in 2012, compared with 15 percent in 2010, and 12 percent of the total number of its stores, double as much as in 2010. The Italian group has been actively investing Latin America. With the purchase of Tecnol it achieved acquisitions totaling €262 million over the past two years. The region will contribute about €230 million in sales this year and €360 million in 2012.

Earlier this year, Luxottica acquired control of Multiopticas Internacional, a group that generated sales of €80 million in 2010 and that managed nearly 500 stores in various Latin American countries at the time of the takeover under different banners including Opticas GMO, Econopticas and Sun Planet – to be precise, 221 stores in Chile, 141 in Peru, 40 in Ecuador and 77 in Colombia. A couple of months earlier, last February, Luxottica bought two other retailers in Mexico, High Tech and Stanza, which together had some 70 stores at the time.

The Mexican stores were due to be renamed as Sunglass Hut. Luxottica recently dispatched an American executive, Eric Anderson, to Chile to run GMO, electing the company as its manufacturing and distribution hub for all of Latin America.