The number of players in the rapidly consolidating $140 billion global eyewear market just dropped by one as the biggest player grew bigger. The European Commission has approved eyewear juggernaut EssilorLuxottica’s $8.5 billion acquisition of GrandVision under the condition that stores in Belgium, Italy, and the Netherlands are divested. Without that action the EC said the merged company would be able to use its position as the leading frames wholesaler to choke off supply to its competitors.
EssilorLuxottica, maker of 70 well-known brands such as Ray-Ban, Oakley, Michael Kors, Varilux, Transitions, and LensCrafters, is a $20 billion French-Italian company. It is the largest supplier of ophthalmic lenses and eyewear in the world. Based in Paris, this vertically integrated company also has a large retail footprint with 10,000 stores. EssilorLuxottica itself is only a few years old, being born out of a $49 billion deal struck in 2017.
GrandVision is a $4.7 billion Dutch-based retailer whose international store brands include Pearle, Eye Wish Opticians, Apollo-Optik, Générale d'Optique, GrandOptical, and Vision Express. It sells EssilorLuxottica products through its 7,000 stores. The deal will give EssilorLuxottica nearly 77% control of GrandVision.
If you wear glasses, chances are very good that they are made by EssilorLuxottica.
EC competition chief Margrethe Vestager said that by acquiring more retail space, “EssilorLuxottica could have degraded the access of rival opticians to EssilorLuxottica's branded eyewear products in Belgium, Italy and the Netherlands.” EssilorLuxottica proposed the divestitures which, Vestager said, will help ensure that competition remains vibrant, but that's debatable.
For the deal to move forward:
- In Belgium, the GrandOptical chain and its 35 stores must be sold but without the brand name. The purchaser will rebrand the stores.
- In Italy, the merged entity must divest 174 stores, which includes the whole of EssilorLuxottica's VistaSi chain together with 72 stores from the “GrandVision by” chain. The VistaSi brand will be transferred and the “GrandVision by” stores will either be rebranded to VistaSi or to the purchaser's brand.
- In the Netherlands, 142 stores from the EyeWish chain must be sold, together with the brand name. The merged entity will keep some stores and will have to rebrand them.
In assessing the impact of the merger the EC considered the following:
- The extent to which the companies are present at each level of the supply chain;
- The extent to which retailers have alternative, credible suppliers to turn to in those countries;
- The proportion of stores that sell the most important EssilorLuxottica brands in those countries;
- The expected reaction of consumers;
- The merged entity's incentive to raise the wholesale prices it charges to retail competitors;
- The merged entity’s incentive to raise retail prices that it charges to consumers in its own store.