EssilorLuxottica first-quarter sales lift, governance tensions continue

EssilorLuxottica posted higher first-quarter sales and maintained full-year targets on Tuesday, just days ahead of an annual meeting where minority investors are expected to voice their frustration over a leadership row at the company.

Formed last October through the merger of French lenses specialist Essilor and Italian spectacles maker Luxottica, the company said it was actively working on some 20 projects to integrate the two businesses and promised to deliver on cost savings.

It plans to update investors on the projects, which range from research and development to marketing, at an investor day in September.

First quarter revenue rose 3.7 percent at constant exchange rates to 4.2 billion euros ($4.71 billion), with growth in all businesses and regions.
Targets, including a rise in sales of 3.5 to 5 percent this year and planned cost savings of up to 600 million euros annually in the next three to five years, were confirmed.

The company, however, made no reference to governance issues that have hampered the 54 billion euro merger in recent months and are likely to take center stage at the group’s annual shareholder meeting in Paris on May 16.

CRISIS

Presented as a logical fit and a merger of equals, the EssilorLuxottica deal was quickly derailed by a management crisis at the top of the new holding company, where both sides accused each other of trying to secure leadership.

Tensions became apparent in November, when Luxottica’s founder Leonardo Del Vecchio, now the group’s largest shareholder, appeared to tap his right-hand man, Francesco Milleri, for the chief executive’s role, irking the French side.

The fight has turned particularly acerbic between Del Vecchio and executive vice chairman Hubert Sagnieres, who share the leadership of EssilorLuxottica.

Essilor and Luxottica are supposed to hold equal weight on the merged company’s board of directors under an agreement that expires in 2021.

In March, Del Vecchio filed an arbitration request with the Paris-based International Chamber of Commerce, a process that takes an average of two years.

In riposte, Essilor asked a Paris court to nominate an outside mediator.

Several minority investors and Valoptec International, an entity which represents current and past employees, are pushing to see independent directors appointed in the hope of easing the deadlock at next week’s shareholder meeting.

EssilorLuxottica’s board has advised shareholders to reject the proposals.