PARIS and MILAN—Plans for a mega merger of Essilor [Euronext Paris: EI] and Luxottica [MTA: LUX; NYSE: LUX], two global giants of the eyewear industry, were announced today by Essilor and Delfin Sarl, the Luxembourg based holding company of the Del Vecchio family, the majority owners of Luxottica. The history making deal would reshape the international optical industry and create “an integrated player dedicated to visual health and superior consumer experience through a combination of Essilor and Luxottica Group,” according to a joint statement issued by the companies.

The new company would be involved in virtually every sector of the optical industry, from retail and wholesale to frames, spectacle lenses and managed vision care. It would have combined revenue in excess of €15 billion, more than 140,000 employees and sales in over 150 countries, according to Essilor and Delfin. Based on the companies’ 2015 results, the new company would have posted combined net EBITDA of approximately €3.5 billion. Based on a preliminary analysis, the combined group is expected to progressively generate revenue and cost synergies ranging from €400 million to €600 million in the medium term and accelerating over the long term, Essilor and Delfin said.

The combination of “two major and complementary global players in the eyewear industry to answer the growing needs in visual health and the appetite for premium branded products,” the companies said. The new group would be in an “outstanding position to propose a comprehensive offering combining a strong brand portfolio, global distribution capabilities and complementary expertise in ophthalmic lenses, prescription frames and sunglasses,” the companies said.

Early reports of the deal began circulating last night, as reported by VMail.

“Our project has one simple motivation: to better respond to the needs of an immense global population in vision correction and vision protection by bringing together two great companies, one dedicated to lenses and the other to frames,” commented Hubert Sagnieres, chairman and CEO of Essilor. “With extraordinary success, Luxottica has built prestigious brands, backed by an industry state-of-the-art supply chain and distribution network. Essilor brings 168 years of innovation and industrial excellence in the design, manufacturing and distribution of ophthalmic and sun lenses. By joining forces today, these two international players can now accelerate their global expansion to the benefit of customers, employees and shareholders as well as the industry as a whole.”

Leonardo Del Vecchio, chairman of Delfin and executive chairman of Luxottica Group added, “With this agreement my dream to create a major global player in the eyewear industry, fully integrated and excellent in all its parts, comes finally true. It was some time now that we knew that this was the right solution but only today are there the right conditions to make it possible. The marriage between two key companies in their sectors will bring great benefits to the market, for employees and mainly for all our consumers. Finally, after 50 years, two products which are naturally complementary, namely frames and lenses, will be designed, manufactured and distributed under the same roof.”

The transaction would involve a strategic combination of Essilor’s and Luxottica’s businesses consisting of Delfin contributing its entire stake in Luxottica, approximately 62 percent, to Essilor in return for newly-issued Essilor shares to be approved by the Essilor shareholders meeting, on the basis of the Exchange Ratio of 0.461 Essilor shares for 1 Luxottica share. Essilor would subsequently make a mandatory public exchange offer, in accordance with the provisions of Italian law, to acquire all of the remaining issued and outstanding shares of Luxottica pursuant to the same Exchange Ratio and with a view to delist Luxottica’s shares, the companies said in the statement.

Under the terms of the agreement, Essilor would become a holding company with the new name EssilorLuxottica through a “hive-down” of all of its operating activities into a wholly-owned company, to be called Essilor International, and the contribution by Delfin of its Luxottica shares, the companies said. Following the transaction, Delfin would own between 31 percent and 38 percent of the shares of EssilorLuxottica and would be its largest shareholder. The voting rights of any shareholder of EssilorLuxottica would be capped at 31 percent and there would no longer be double voting rights for the shares.

The board of directors of Essilor unanimously approved the agreement with Delfin on Jan. 15, 2017. The Luxottica board of directors, on the same date, unanimously acknowledged the transaction was in the best interest of Luxottica and shared the strategic rationale of the business combination.

Executive chairman, Leonardo Del Vecchio, would serve as executive chairman and CEO of EssilorLuxottica while Essilor chairman and CEO, Hubert Sagnieres, would serve as executive vice chairman and deputy CEO of EssilorLuxottica with equal powers as the chairman and CEO.

Leonardo Del Vecchio and Hubert Sagnieres would also keep their positions of executive chairman of Luxottica and chairman and CEO of Essilor International, respectively.

The EssilorLuxottica Board of Directors would consist of 16 members: eight members nominated by Essilor, comprising Sagnieres, two employee representatives, one Valoptec representative and four independent members. Eight members nominated by Delfin, comprising Del Vecchio, three Delfin representatives and four independent members.

Each company will remain separate entities under the holding company, an Essilor of America spokesperson told VMail. “Any integration will take place after the closing of the deal and will take place over the following three years. There will be no changes in the day to day operations of either company within the coming year.

“This combination gives the companies opportunities across all segments of the eyewear industry by combining our expertise in lenses and frames,” the Essilor spokesperson continued. “This would include supply chain management, frame, lens and wearable innovation, investing in the consumer’s understanding of the value of good vision and the importance of an annual eye exam.”

Essilor will be establishing an advisory committee of key customers, the Essilor spokesperson told VMail. “There is not an exact timetable set for this but it will be one of the first things we do. We also will be at all major industry meetings to set up discussion forums to answer any questions and gather additional input. We are answering questions about this merger through a special email, AskEssilor@essilorusa.com,” the spokesperson said.

The transaction is subject to Essilor’s Works Councils’ information and consultation procedure according to French law.