Luxottica Buying Oakley for $2.1B

by MR Magazine Staff

NEW YORK – Luxottica Group said late Wednesday that it has reached a definitive agreement to acquire Oakley for about $2.1 billion.

Under the agreement, Oakley shareholders would be paid $29.30 a share in cash. Luxottica would also purchase all outstanding options and other equity rights at $29.30 a share minus any applicable exercise price.

The companies said that the price represents a premium of 18% over Oakley’s most recent 30-day average price on the New York Stock Exchange and a 24% premium over the most recent three-month figure. Oakley’s stock closed at $25.23 in NYSE trading Wednesday, four hours before the merger was announced.

The acquisition, expected to close in the second half of 2007 contingent upon approval by Oakley’s shareholders and other conditions, would be funded by operating cash flow, Luxottica’s existing credit line and additional credit facilities available at closing.

The companies said that operating synergies should save them about 100m euros, or about $133.8 million at current exchange rates, per year within three years.

“Significant changes in market dynamics require industry leaders to perfect a mix of best-in-class products and marketing with technical and operational capabilities,” said Leonardo Del Vecchio, group chairman of Luxottica. “Luxottica has long admired the Oakley business and corporate culture, inspired by founder Jim Jannard. Oakley and Luxottica share a mutual commitment to quality, innovation and technical skills, qualities which will help us to solidify Oakley’s brand position and Luxottica’s strong leadership in the market.”

Jannard, chairman of Oakley, said, “Oakley’s technology and performance is one of the world’s best kept secrets and this partnership should empower our ability to tell our story throughout the world. I am encouraged by the fact that Luxottica’s management has come to understand the unique, rogue nature of Oakley in the eyewear industry and is committed to preserving it.

“Oakley will continue to be Oakley but with much greater resources and a platform for realizing the true potential of our brand and company,” he continued. “Given the opportunities in front of us, I wrote Mr. Del Vecchio this morning indicating my intent to make an investment in the company after the transaction closes.”

The announcement, made jointly from Oakley’s headquarters in Foothill Ranch, Calif., and Luxottica’s in Milan, noted that “Luxottica provides a global platform to showcase the Oakley brands while enhancing its international distribution capabilities.” It pointed out that the combined firms’ “retail platform includes luxury, fashion, lifestyle and sports concepts.”

Luxottica is the world’s largest retailer and wholesaler of eyewear, with over 5,800 optical and sunglass stores and consolidated 2006 revenues of 4.7 billion euros, nearly $6.3 billion at current exchange. It owns Ray-Ban and licenses luxury and designer brands including Prada, Burberry, Bulgari, Dolce & Gabbana and Polo Ralph Lauren. Retail properties include LensCrafters and Pearle Vision in North America and Sunglass Hut globally.

The two companies have a longstanding relationship, but one marked by occasional conflict. Although Oakley has been a major supplier to Luxottica’s Sunglass Hut chain, it’s also competed with it through its Iacon subsidiary, which houses the Sunglass Icon retail chain. Oakley and Sunglass Hut even ceased doing business for a period earlier in the decade following tugs-of-war over intellectual property rights and Oakley’s retail strategy, but reached a new agreement at the end of 2004.