March 21, 2019 / 9:22 AM / in 5 months

EssilorLuxottica shares slump on new Franco-Italian board ructions

PARIS (Reuters) - EssilorLuxottica’s shares slumped on Thursday on renewed Franco-Italian tensions in its boardroom as the top shareholder and executive chairman accused the vice chairman of a power grab.

FILE PHOTO: The Luxottica name is reflected in a pair of sunglasses in this photo illustration taken in Rome February 4, 2016. REUTERS/Alessandro Bianchi/File Photo

Shares in spectacles company EssilorLuxottica were down 4.8 percent by 1000 GMT, among the worst performers on both the Paris and broader European markets.

France’s Essilor and Italy’s Luxottica merged last October, creating the world’s largest eyewear maker in a 54 billion euro ($61.6 billion) deal.

The two groups were supposed to have equal weighting in the leadership of the combined company but they now accuse each other of trying to gain the upper hand, the latest example of squabbles between France and Italy over business partnerships .

In an interview in French newspaper Le Figaro, Leonardo Del Vecchio, the Italian founder of Luxottica who is now the largest shareholder and executive chairman, was quoted as saying Hubert Sagnieres - the French executive vice chairman - listened only to himself.

Del Vecchio also said the 400-600 million euros of cost-savings that the merger was expected to yield had fallen behind schedule, and were now expected over five years instead of three years as originally anticipated.

“This declaration of internal war can only be damaging to the company,” said Gregoire Laverne, fund manager at Roche Brune Asset Management, which has decided against investing in EssilorLuxottica.

Del Vecchio, 83, had previously irked the French side by apparently trying to earmark his right-hand man Francesco Milleri for the chief executive’s role. The group has just launched the search for a CEO to be appointed by the end of next year.

TENSIONS ACROSS THE ALPS

With the division of power unclear, analysts say tensions risk undermining the integration process at the group, whose stock has fallen around 10 percent so far in 2019 while Paris’ benchmark CAC-40 index has gained nearly 15 percent.

“Investors continue to recognise the industrial logic behind the deal, while remaining concerned around the clear differences between the two more senior execs within the group,” wrote brokerage Jefferies.

“Understandably, the critical unknown is just how deep this fracture runs between the two parts of the enlarged group,” added Jefferies, which has a “hold” rating on the stock.

France and Italy have had previous disputes concerning companies, while there have been diplomatic rifts between the Paris and Rome governments this year, which led to France briefly recalling its ambassador to Rome.

French media conglomerate Vivendi is involved in a boardroom battle at Telecom Italia, in which it has a 24 percent stake, and Vivendi also has a pending lawsuit with Mediaset.

The planned merger of Italian shipbuilder Fincantieri with STX France has also been hindered by tensions between the Paris and Rome governments.

($1 = 0.8762 euros)

Reporting by Sudip Kar-Gupta and Blandine Henault; Editing by Keith Weir

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