The chance that the takeover of the Dutch optical chain GrandVision by the French-Italian Essilor-Luxottica will go ahead as planned has become a lot smaller on Monday. A Swiss arbitration court ruled that GrandVision violated several conditions of the purchase contract during the corona crisis. It means that Essilor can waive the acquisition without penalty.
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Essilor has been acquiring the Dutch parent company of eyewear stores such as Pearle and Eye Wish for almost two years now. In the summer of 2019, the group announced that it would take an almost 77 percent stake in the optical chain for 7 billion euros. That interest is still in the hands of investor HAL. But the coronavirus pandemic has put pressure on the deal. GrandVision temporarily closed stores and paid suppliers later during the pandemic.
Doubt about Essilor after pandemic
Essilor doubts that GrandVision is still as good as it was when the deal was announced. That is why it had GrandVision’s business administration seized last year. However, the French-Italian concern was not given access to the data. A Dutch judge rejected that request twice.
With the purchase of GrandVision, EssilorLuxottica gains a base in Northwest Europe
HAL feared that Essilor was pulling out of the acquisition. At the same time as the first lawsuit, the investor started proceedings in Switzerland to push through the deal on original terms. If Essilor is not prepared to do so, it would have to pay a contractually agreed fine of 400 million euros. That fine is now off the table, HAL reports in a short statement. No appeal is possible against the judgment of the arbitration court.
Whether the takeover will go ahead is now up to the French-Italian company. Essilor says in a response to “reconsider the options”. However, abandoning the merger seems unattractive. The benefits still stand.
Italian frame designer Luxottica (Ray-Ban, Michael Kors) announced in 2017 that it was merging with French glass sharpener Essilor. The problem was that the two mostly had their own stores in the Americas, not Europe. With the purchase of GrandVision, EssilorLuxottica is gaining a foothold in Northwest Europe. In addition, all competition authorities have already approved the deal. The condition is that the new group sells more than 350 stores. This includes the sale of optical chain Eye Wish. GrandVision has a total of 7,260 stores, Essilor more than 9,000.
The most likely scenario is that Essilor will use the arbitration court’s judgment to force a lower acquisition price. That also happened last year at the French luxury group LVMH that wanted to buy jewelry chain Tiffany. Ultimately, LVMH (Louis Vuitton) managed to achieve a lower purchase price by initially canceling the acquisition. Something similar happened around the purchase of the Hague bank NIBC by Blackstone.