Feud at Ray-Ban Parent Wipes Out Shareholder Gains

(Bloomberg) --

EssilorLuxottica SA shares slumped, erasing all their gains since the agreement to create the world’s largest eye-wear company as a 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.

The 83-year-old Italian billionaire has been locked in a dispute with Vice Chairman Hubert Sagnieres about who should lead the combined company. The dispute heated 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, a holding company controlled by Del Vecchio, said Wednesday that some Essilor representatives have deliberately prevented Delfin from exercising its equal share of managerial authority, the company said by email.

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.

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."

Representatives of EssilorLuxottica didn’t respond to telephone calls.

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