GrandVision Slumps on Concern Ray-Ban Owner May Walk Away

GrandVision NV slumped the most in more than a year after EssilorLuxottica SA won a ruling that gives the Italian maker of Ray-Ban sunglasses leverage to renegotiate its proposed 7.3 billion-euro ($8.7 billion) purchase or even walk away at no cost.

EssilorLuxottica said late yesterday that it’s “reviewing its options” following the arbitration decision, without specifying its preferred course of action. The tribunal’s vote means EssilorLuxottica can abandon its pursuit without having to pay a 400 million-euro fee, handing it considerable bargaining power in an increasingly bitter back and forth between the two sides.

Since GrandVision agreed to a purchase price in July 2019, relations have soured with EssilorLuxottica, which went on to sue GrandVision for information over the performance of its stores hit hard by the pandemic. GrandVision’s network of more than 7,000 international stores was seen as a way to solidify EssilorLuxottica’s dominance in the global eyewear market, but lockdowns and the tilt toward online have diminished the attraction of such a franchise.

“The news is positive for EL not just because it provides the opportunity for better terms in the deal, but also because it proves management right in their assessment of the situation and in their determination to pursue the case,” Deutsche Bank AG analysts Francesca DiPasquantonio and Dan Gianera wrote in a note, calling it a “win-win” for EssilorLuxottica.

Misconduct Allegations

GrandVision said it’s “disappointed” by the verdict, which puts pressure on the owner HAL Investments -- an holding controlled by the billionaire Van der Vorm family -- to agree to different terms.

The Dutch company fell as much as 2.4 euros, or 8.8%, to 24.9 euros in Amsterdam, the steepest drop since April last year. EssilorLuxottica, whose billionaire founder Leonardo Del Vecchio is the biggest shareholder with a 32% stake, fell as much as 2.1%.

EssilorLuxottica said GrandVision displayed material breaches of its obligations” toward the suitor, and that the Dutch company’s “misconduct” had led to the current situation.

GrandVision Takeover Needs Price Discount to Succeed: Survey

EssilorLuxottica’s tussle with GrandVision resembles other deals that ran into trouble after Covid-19 lockdowns closed shops around the world, sapping demand for goods and impacting stock prices. The luxury juggernaut LVMH ended up buying U.S. jeweler Tiffany & Co. at a slightly reduced price, avoiding a courtroom battle over an earlier agreement that soured.

Even before this week’s ruling, EssilorLuxottica had weighed its options. While it obtained the EU’s blessing for the transaction in March, the impact of the pandemic and the legal spat with GrandVision has led the bidder to reconsider, including renegotiating the price or even walking away, people familiar with the situation said in December.

Billionaire Founder

EssilorLuxottica started moving ahead with the sale of some optical retail businesses in Italy, the Netherlands and Belgium to meet European Union antitrust requirements for the deal, people familiar with the situation said this month. The move may signal that the company still sees completion of the transaction as the favored outcome, albeit at a different price.

The outcome will ultimately depend on Del Vecchio, the 86-year-old tycoon who has managed to retain control after the audacious combination of Luxottica and the French Essilor lens-making business. That deal was originally sold as a merger of equals but that was also plagued by animosities between the two sides.

“EssilorLuxottica has a strengthened hand in this process and a free option to walk away,” RBC Europe Ltd. analyst Piral Dadhania said in a note. Renegotiation of the deal is the most likely outcome, he said.

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