Another deal appears ready to shake up the eyewear industry.
This story first appeared in the January 20, 2017 issue of WWD. Subscribe Today.
LVMH Moët Hennessy Louis Vuitton is poised to acquire between 5 percent and 10 percent of Marcolin as part of an agreement for the Italian eyewear firm to produce sunglasses for several of the French group’s fashion brands, WWD has learned.
Market sources said LVMH, headed by Bernard Arnault, was considering a symbolic investment in Marcolin, confirming an earlier report by Bloomberg. The deal would be similar to the company’s acquisition of a 3.5 percent take in Italian leather goods group Tod’s at the time of that firm’s flotation in November 2000.
A spokesman for LVMH said the company does not comment on rumors.
Following the reports of a possible deal, Safilo shares were down 13.91 euros to 6.84 euros, or $7.30. Safilo produces and distributes eyewear collections for several brands in the LVMH stable, including Dior, Céline, Fendi, Givenchy and Marc Jacobs.
A statement from the company said: “We don’t comment on speculations.” It went on to cite its 2020 Strategic Plan, saying: “Our 2020 Strategic Plan spelled out the choice to drive a balanced and sustainable brand portfolio over time and through any potential changes as they may be. This strategic portfolio management is key to guarantee effective long-term business stability for Safilo, and continued maximum use of our integrated business infrastructure, namely product design, engineering and manufacturing, as well as worldwide distribution,” and considers itself prepared to face market changes. It said all expiration dates for licenses “remain unchanged” and it’s equipped to “lead interventions to re-balance our portfolio with short-term interventions to ensure positive mid- to long-term impact” for growth.
In 2014, Safilo had to readjust its strategies for the Gucci license when Kering said it was assuming control of its eyewear business.
In December, Safilo said it had renewed its license with Christian Dior Couture, part of the LVMH stable. The Italian eyewear company and the French firm extended the agreement for the design, production and worldwide distribution of the Dior and Dior Homme eyewear collections through Dec. 31, 2020.
At the same time, Safilo said its licensing agreement with Céline, which will officially expire at the end of 2017, was not being renewed.
Safilo originally signed with Céline in 2011 for the design, production and manufacturing of the French luxury brand’s eyewear collections. According to Safilo, the licensing agreement with Céline accounts for 3 percent of its total sales.
Safilo closed 2015 with revenues of 1.28 billion euros, or $1.42 billion at average exchange rates.
The reports follow the news earlier this week of a merger between Luxottica Group and Essilor of France and contribute to the ever-changing landscape of the sector.
Luxottica produces eyewear under license for names including the Giorgio Armani Group, Bulgari, Burberry, Chanel, Coach, Prada and Versace and also has a number of owned brands, such as Ray-Ban, Oakley and Persol. It and Essilor, the leading maker of lenses worldwide, have agreed to a 46 billion euro, or $48.7 billion, merger to form an eyewear powerhouse with annual sales of more than 15 billion euros, or $15.9 billion at current exchange.
Commenting on a possible LVMH investment in Marcolin, Luca Solca, managing director, sector head global luxury goods at Exane BNP Paribas, said that, “if confirmed, the deal could mean that LVMH is preparing to integrate vertically in the eyewear business through the acquisition of production capacity from Marcolin as well as a distribution network similar to Kering eyewear.”
Marcolin was founded by Giovanni Marcolin Coffen in 1961 in Langarone, Italy, in the Cadore eyewear district. PAI Partners took control of the company in 2012. Brothers Diego and Andrea Della Valle, who invested in Marcolin in 2004, remained shareholders of the firm, which is led by chief executive officer Giovanni Zoppas, who joined in December 2011.
Marcolin went public on the Milan Stock Exchange in 1999 and was delisted in 2013, following PAI’s investment. Its brand portfolio includes Balenciaga, Diesel, Dsquared2, Emilio Pucci, Ermenegildo Zegna, Moncler, Tod’s, Tom Ford and Robert Cavalli, among others.
In 2015, the company sold about 14.3 million eyeglasses.
In 2014, Kering overturned the usual practice of licensing eyewear to a manufacturing and distribution specialist when it said it would evolve its 20-year partnership with Safilo, terminating its license for the cash-cow Gucci brand at the end of 2016, two years earlier than planned, in exchange for compensation of 90 million euros, or $96.1 million, to be paid in three installments. Kering set up a product partnership with Safilo for four years starting in 2017, renewable after that.
At the time, Kering said that the new business model allowed it to “fully control the eyewear value chain, from design to product development and supply chain, and from branding and marketing to sales.” Roberto Vedovotto, formerly chief executive officer of Safilo, was appointed Kering Eyewear ceo. At the time, Safilo had licensing pacts with Saint Laurent, Bottega Veneta, Alexander McQueen and McQ brands, which are now produced by Kering Eyewear.
According to Euromonitor International, the global eyewear market is worth $121 billion and Luxottica is the leading eyewear company with a 14 percent share in 2015, up from 12 percent in 2010. Essilor follows with a 13 percent share, up from 11.05 percent in 2010.
Jasmine Seng, personal accessories industry analyst, Euromonitor International, said in the wake of the Luxottica and Essilor merger that it “would be another severe blow” to Safilo, which takes up 4.3 percent of the global spectacles market.