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EssilorLuxottica locked in leadership dispute, arbitration requested

03/04/2019By Callum Glennen
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EssilorLuxottica has found itself embroiled in a leadership row, with the company’s board in a state of deadlock after allegations that the merger agreement between Essilor and Luxottica has been violated.

Under the agreement signed by Essilor and Luxottica ahead of their €54 billion (AU$85.1 b) merger completed last year, both sides agreed that until 2021 they would share equal weight in the combined company’s leadership. However, both factions are now accusing the other of violating that agreement.

As reported by the Financial Times, the disagreement surrounds the appointment of a new managing director for the merged group. Mr Hubert Sagnières, executive vice-chairman of EssilorLuxottica and former head of Essilor, accused Mr Leonardo Del Vecchio, executive chairman of EssilorLuxottica and former boss of Luxottica, of attempting to orchestrate a takeover of the merged company by forcing his choice of managing director onto the group.

Del Vecchio, who is also EssilorLuxottica’s largest shareholder, denies the accusation.

Escalating the situation, Del Vecchio has hit back through his family holding company Delfin by lodging an arbitration request with the International Chamber of Commerce (ICC) in Paris. The request claims that a “stalemate” amongst the company’s board of directors is threatening to halt the integration process.

Del Vecchio claims that Sagnières has committed a number of violations of the agreement, including not undertaking the “duties of sincere cooperation and good faith” that were previously established.

The arbitration request is seeking an “injunction to respect this agreement until its expiry”. While there is no set length for arbitration cases, Reuters reports that the ICC usually takes two years to rule on matters like these. Following that, the defeated party then has the option to appeal.

A public war of words has now been dragging on between Sagnières and Del Vecchio for several months, with each issuing public statements accusing the other of making a grab for power.

EssilorLuxotica had previously committed to appointing a CEO of the merged group by the end of 2020. In November 2018, Del Vecchio put forward Mr Francesco Milleri, CEO of Luxottica, for the position. A CEO is yet to be appointed.

The merger between Italian frame maker Luxottica and French lens maker Essilor was completed in October last year when Delfin transferred its stake in Luxottixa to Essilor. In March 2019, the company released its first financial results as a joint entity and reported relatively strong results. Despite this, the company’s share price has since been dragged down by the ongoing leadership dispute and concerns for its future stability.

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More reading:

EssilorLuxottica releases first financial results
Essilor-Luxottica merger complete

 

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