GIANT, cross-border mergers in Europe have been rare in recent years. Deals fail to happen even when mid-sized companies—such as family-owned and run specialist manufacturers in northern Italy or the Mittelstand in Germany—have the chance to gain global heft. For that blame founding owner-managers, many of whom are reluctant to lose control of treasured companies. Blame too an artisanal culture, particularly in southern Europe, in which firms’ owners say they are content to remain small and relatively obscure. Occasionally, too, nationalist politicians block efforts by perfidious foreigners to snaffle prized local brands.
Now, though, one of the largest-ever mergers in Europe actually looks set to go ahead. Luxottica, an Italian maker of fancy specs that was founded in 1961—it owns brands such as Ray Ban and Oakley—is to merge with Essilor, a spiffy French producer of lenses. The joint entity is set to combine Italian style with deft French engineering. The deal is supposed to be completed by the end of the year, creating a new entity with a market value of €46bn ($49bn), 140,000 staff and annual revenues of €15bn. It will be listed on the Paris bourse as its eighth-largest company by market capitalisation.
The deal, long awaited by those who keep an eye on the luxury-goods industry, is the product of six months of secret talks between the two companies. Eyewear is booming. Already a €90bn global market, its prospects shine. Over 60% of the global population are said to need glasses (or surgery) to correct imperfect vision, and increasing numbers of people, particularly in emerging markets, are coming to realise it. It also helps that many consider spectacles to be essential as fashion accessories or for protection from ultraviolet rays. Among growing cohorts of middle-class consumers in Asia, European fashion brands have the highest status.
The two firms claim—as companies involved in a merger do—they will cut significant costs by co-operating and through economies of scale. More important, however, is the relative expertise of each one. Essilor used to be a health-care company and is known for its excellence in production; Luxottica focuses on consumer demand, styling and marketing. The French company had long sought a tie-up with the Italian firm, but its founder and owner—Leonardo Del Vecchio, now 81 years old—had resisted. Now he gushes that “two products which are naturally complementary, namely frames and lenses, will be designed, manufactured and distributed under the same roof”.
His change of mind will help to resolve anxieties over succession at Luxottica. Brought up in poverty, Mr Del Vecchio is now said to be worth €20bn. Through his family trust, Delfin, he will become the largest shareholder in the merged entity (potentially with as much as 38% of the new firm) and will be named its “executive chairman and chief executive”. The (younger) boss of Essilor, Hubert Sagnières, is to share managerial duties and may be heir-apparent.
Will this merger, assuming all goes to plan, encourage other cross-border ones in Europe? Two bids by big French companies for control of firms in neighbouring countries are currently under way. St Gobain, a huge building supplies firm, is locked in a prolonged and hostile bid to get control of Sika, a Swiss adhesives firm. Vincent Bolloré, a prominent French billionaire, is leading Vivendi, a media firm he controls, in an audacious bid for Mediaset, a television company in Italy that is mostly owned by Silvio Berlusconi, a former prime minister, and his family. But neither of these deals is anywhere close to being as amicable as that unfolding in the eyewear industry. The consultants, bankers and advisers dreaming of megamergers in Europe will need patience. It is too early to claim that a dazzling period of dealmaking awaits.