Feud at Ray-Ban Parent Wipes Out Shareholder Gains

(Bloomberg) --

EssilorLuxottica SA erased the last of its gains since an agreement to create the world’s largest eye-wear company as an intensifying management clash between Italian and French factions threatened to undermine the merger.

The stock fell as much as 5.8 percent to the lowest level in more than two years on Thursday. Leonardo Del Vecchio, the company’s largest shareholder, said Wednesday that Essilor executives are violating the terms of the agreement and the company’s corporate governance.

Vice Chairman Hubert Sagnieres shot back Thursday that Del Vecchio’s actions reflect a “de facto attempt to take control of the new group.” The French executive accused the Italian’s investment company, Delfin, of “false accusations regarding the group’s governance and management.”

The 83-year-old Italian billionaire has been locked in a dispute with Sagnieres about who should lead the combined company. It flared up at a board meeting Monday and threatens to derail the combination of the Italian maker of Ray-Ban sunglasses and the world’s biggest lensmaker, France’s Essilor.

“The divisions right at the top of EssilorLuxottica will be difficult to mend,” wrote James Grzinic, an analyst at Jefferies. “Governance remains the critical stumbling block” to attract investors to the stock.

Essilor managers have opposed Del Vecchio’s suggestions to name Francesco Milleri to become the next CEO, according to Le Figaro. Delfin said Wednesday that some Essilor representatives have deliberately prevented the firm from exercising its equal share of managerial authority.

EssilorLuxottica shares have lost about a quarter of their value since the merger was completed on Oct. 1. as French and Italian reports trickled out about disagreements between both sides.

Del Vecchio had agreed to have his voting rights limited to 31 percent and to equal representation of Delfin and Essilor on the new company’s board and in the power of top executives.

Del Vecchio said he complained Monday at a board meeting that the Essilor side violated their pact, according to an interview in Le Figaro. Sagnieres, who was CEO of Essilor, named four key managers who all came from the Essilor side in January, and Del Vecchio only learned about their contracts two weeks ago, he told the French newspaper.

Sagnieres said it’s Del Vecchio who’s trying to change the balance of power within the combined company.

“Despite his denials, a certain number of his actions reflect a de facto attempt to take control of the new group, without any premium offered to shareholders,” Sagnieres’ statement said.

Delfin said it reserves the right to take “such actions as it will deem necessary or appropriate to protect its interest,” though it will continue to comply with the merger agreement and corporate governance rules.

"I invested all my fortune after 60 years of work in the new company," Del Vecchio told Le Figaro. "It’s a long term investment and I don’t regret it."

--With assistance from Chiara Remondini and Robert Williams.

To contact the reporters on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net;Albertina Torsoli in Geneva at atorsoli@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Eric Pfanner, John Lauerman

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