Ray-Ban Owner's Squabbling Co-CEOs Agree to Step Back

(Bloomberg) -- EssilorLuxottica’s efforts to defuse a leadership dispute at the merged owner of Ray-Ban and Oakley sunglasses were met with doubt from analysts and criticism from a corporate-governance expert.

Peter Montagnon, an associate director at London’s Institute of Business Ethics who had been proposed to become an independent board member at the eyewear company, called it a “sham agreement.” The shares pared most of their earlier gains of as much as 5.1 percent.

The comments cast a pall over the agreement between Chairman Leonardo Del Vecchio, who led the Luxottica side, and Vice Chairman Hubert Sagnieres, who comes from Essilor, to transfer power to their respective deputies, who would not seek the CEO position. The deal comes just three days before the Franco-Italian company’s first meeting with shareholders, some of which have proposed naming independent board members to try to end the standoff.

“This is a sham agreement which will not solve the fundamental governance problems at EssilorLuxottica,” Montagnon said by email, urging investors to vote for two candidates proposed by asset management firm Comgest. “At the very least, this board needs to appoint a lead independent director through whom the institutions can channel their concerns.”

Del Vecchio’s investment company Delfin followed up with a statement of its own, saying it stands by the agreement and pledging support for the further integration of the two companies. It said it’s seeking the appointment of a new CEO by the end of 2020.

CEO Search

The two deputies, Francesco Milleri and Laurent Vacherot, have said they don’t aim to be the next CEO, enabling the search for a compromise candidate, the company said.

Citigroup analyst Mauro Baragiola said the accord is more of a truce than a peace deal and the rift may still worsen.

“We still see a big culture clash,” he wrote.

The stock is down 14 percent since the companies sealed their $53 billion merger seven months ago. Investors and analysts have expressed concern about delays to the promised synergies of as much as 600 million euros.

“Even with the threat of arbitration removed, EssilorLuxottica has yet to clarify its strategy with investors," Bloomberg Intelligence analyst Deborah Aitken wrote.

The dispute flared up after Del Vecchio, the largest shareholder with 31 percent of the combined company, said he’d like to appoint his deputy as CEO soon after the merger was concluded. Sagnieres countered that the Italian was making false statements in an effort to seize control of the group created by the megadeal last year. Del Vecchio filed for arbitration from the International Chamber of Commerce in March. The company said the agreement ends that process.

The organization that had proposed naming Montagnon to the board stood by the compromise. The deal is a “quantum leap for the governance of EssilorLuxottica,” according to the group, called Valoptec, which represents Essilor employees who own a combined 4 percent stake in the company. Valoptec said it no longer wants to appoint a new board member.

New manager Vacherot will join the board, which has started the search to fill the CEO position. The board is evenly split between the Essilor and Luxottica sides.

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