European Eyewear AG is the tentative name chosen for the new holding company, being registered in Stuttgart, that will combine all the assets of Germany's Metzler and Italy's Filos Group, in addition to some of Moulin International's operations outside Asia. The key word is critical mass. In 2002, the new group should have total sales of about 140 million euros, of which about 60 percent will be generated in Europe, 20 percent in the USA and 20 percent in the rest of the world.
The new merger, which has yet to be finalized, gives Metzler and Filos new weapons to compete with Luxottica, Safilo and other large Italian eyewear conglomerates. Thanks to Filos' presence in the group, it also gives all the partners, including Hong Kong-based Moulin, easier access to top brands, which tend to insist on the ?made in Italy? label as a condition for a licensing contract. It gives them also a solid and comprehensive international sales network.
The discussions between Metzler and Filos started about one year ago, well after Metzler and the French L'Amy group failed to agree on a merger between themselves, prior to the latter's management buyout. Moulin acquired a 25.1 percent minority stake in Metzler late last year, and it had agreed to take over majority control of Filos last August, but the latest agreement goes much further.
Metzler and Filos each represent about half of European Eyewear's projected sales, aside from a certain portion of Moulin's foreign turnover, mainly under its own Etienne Aigner brand. The latest addition to European Eyewear's portfolio of brands is Revlon, for which Filos recently obtained the worldwide license for a line which was first shown at the Silmo fair in Paris a few days ago. Filos and Metzler are contributing many other important brands to the group. On Filos' side, there are such brands as United Colors of Benetton, Vivienne Westwood, Longines, Krizia, Kappa, Sisely, Fratelli Lozza and Superga, among others. Metlzer contributes Longines, Paloma Picasso, Jeff Banks, Marc O'Polo, Mondi, Otto Kern, Oilily, Mistral, Giordano and Speed, for example.
On the sales side, the new group will benefit from Filos' strong sales network in Italy, France and the whole Mediterranean region, from Metzler's strength in the Germanic countries and in Japan, where it has its own sales subsidiary, and from Moulin's presence in the Asia/Pacific region. Metzler will integrate what remains of Filos' own distribution operations in Germany, but the future structure in the UK, where both companies have a well-run subsidiary, has yet to be decided. In North America, Moulin's subsidiary, Liberty Optical, will work together with Filos North America and with a sister company, Optifashion, which are both independently owned.
On the production side, Eyewear Europe will have at its disposal the 3 remaining factories of Filos in Italy, one of which is being closed down, and Metzler's modern factory in the Czech Republic, plus Moulin's large manufacturing facilities in China, for a total worldwide capacity of more than 15 million frames a year. Moulin will be the group's exclusive contractor in the Far East, replacing a variety of low-cost suppliers. Major synergies and savings are expected at group level in the procurement of components and in administrative procedures.
The final equity stakes in Eyewear Europe have not yet been defined. Following a major equity increase, which was intended in part to refinance Filos, the main shareholders are a European holding company of Moulin, Italy's San Paolo/IMI investment bank, and the original shareholders of Metzler and Filos, along with key members of their management. The merger agreement was signed last Oct. 11, but executives of the group still decline to say at this stage whether any of the shareholders may end up having majority control, indicating that the equity structure may evolve further in the near future.
A board of directors has yet to be nominated. It will designate the group's chief executive officer. A strong candidate is Ulrich Fischer, who has been chairman and CEO of Metzler for the past 2 years. He be a shareholder of European Eyewear and a member of the board.
Meanwhile, some other top executives of Filos and Metzler have already been assigned global responsibilities. Filos will contribute its design and marketing expertise, and Lucio Lozza, CEO of Filos, will be the marketing manager of European Eyewear. Horst Tausz, international director of Metzler, will coordinate the group's global sales network. Dierk Gallitz and Jürgen Heinz, who are respectively the technical and finance manager of Metzler, are taking on responsibility in these sectors for the whole group.
The merger solves some financial problems for Filos Group, which is itself the result of various mergers intended to reach critical mass. In 1994, Lucio Lozza, a 40-year-old US-educated executive who had already worked at Olivetti and McKinsey, took over the company, founded by one of his ancestors 55 years ago, and brought in 21 Investimenti, one of the investment vehicles of the Benetton family, which subsequently brought its own United Optical subsidiary into Filos Group in two stages, and then cashed out completely. Filos took over recently also another Italian eyewear firm, Italiana Occhiali. The number of factories was reduced to eliminate duplications, and the group now has 290 employees in Italy.
At the same time, Filos set up its UK subsidiary and took a controlling interest in one of its German distributors, which it sold back later on for lack of financial resources, keeping another German firm in operation. These and other investments allowed the group to grow from an annual turnover of e6 million in 1994 to e43 million in the past year, but they also caused a serious cash squeeze that led to a first round of refinancing last July, with the San Paolo/IMI bank stepping in. Last June, Filos Group's order backlog was up 25 percent from one year earlier, but the financial problems led it to lose some of these orders and precipitated the change of ownership.
Filos, Metzler and Moulin were all working together already on Filos' United Colors brand and other Benetton lines inherited through United Optical. Metzler distributed them in Germany. Moulin had a sublicense for the Chinese market.
