Essilor, the world’s biggest producer of eyeglass lenses by sales is buying a 51 per cent stake in Transitions Optical from partner PPG Industries for $1.73bn

July 30, 2013 Leave a comment

July 29, 2013 4:39 pm

Essilor buys majority stake in Transitions Optical for $1.73bn

By Adam Thomson in Paris

Essilor International, the world’s biggest producer of eyeglass lenses by sales is buying a 51 per cent stake in Transitions Optical from partner PPG Industries for $1.73bn.

The acquisition will hand Essilor full ownership of Transitions Optical, the inventor of plastic lenses that darken in ultraviolet light, and increase the French company’s exposure to a segment that is growing twice as fast as the overall optics industry.Last year, sales at the Transitions Optical joint venture were $814m. Monday’s deal also includes Intercast, an Italian sunglasses manufacturer.

Essilor shares rose 5.9 per cent on the announcement, reaching €85.39 by early afternoon trading. The stock has gained more than 12 per cent since the beginning of the year.

Analysts welcomed the move. “We see this as a landmark deal for Essilor,” said Jonathan Beake at Citi. “They didn’t pay too much for it and it’s a segment that has high growth rates and higher margins than the overall eyeglass industry.”

HSBC said the announcement would remove uncertainty about Essilor’s joint venture with US-based PPG ever since the two companies said they were studying several options a few months ago. “Today’s deal is a significant one,” it said in a research note.

Essilor said the deal, the latest in a recent flurry of cross-border mergers, acquisitions and sales involving French companies, would “lead to a significant improvement in the group’s profitability”.

The company said the deal would boost its operating margins to 19.5 per cent from year two. They are about 18 per cent now.

In a separate statement, PPG, which manufactures paint and coatings, said it would use the cash for acquisitions as well as to buy back its own shares.

Both companies said they expected to complete the deal by the first half of next year.

Filed under Macro Trends

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