EU's Vestager says Essilor-Luxottica merger requires thorough vetting

CERNOBBIO, Italy (Reuters) - The proposed merger of Italian spectacles maker Luxottica LUX.MI with French lens manufacturer Essilor ESSI.PA will require thorough vetting by European antitrust authorities, the head of the bloc's competition watchdog said on Saturday.

FILE PHOTO: Lens producers Essilor' s logo is seen in an optician shop in Paris, France, March 15, 2016. REUTERS/Philippe Wojazer/File photo

Luxottica, the world’s biggest eyewear company whose brands include Ray-Ban and Oakley, agreed in January a merger with Essilor, the biggest lens maker, to create an industry giant with a market value of 47 billion euros ($56 billion), more than 15 billion euros in revenues and 144,000 staff.

The deal needs to clear antitrust hurdles in several countries and if approved is expected to close around the end of the year.

The EU Commission was officially notified on Aug. 22 .

EU Competition Commissioner Margrethe Vestager said it was too early to say whether approval may require the companies to make significant concessions.

“These are companies that have very big market shares and also, when it comes to sunglasses and lenses for glasses, obviously this is an important market, it is a very valuable market so I cannot say,” she told Reuters on the sidelines of the Ambrosetti business conference in Italy.

A negative reaction from Essilor’s customers to the merger, which the company said in July had affected its first-half sales, has raised concerns among analysts that the two companies may be required to take more substantial concessions to satisfy the competition regulators than initially anticipated.

Exane-BNP Paribas analysts said in a recent note the examination of the deal by EU competition authorities would include sounding out competitors, clients, and professional associations as well as reviewing possible complaints.

“Hence our concern over the mounting pushback from customers, recently stressed by Essilor,” they said.

A ‘vertical integration’ between two companies operating at different stages of the production chain is normally less worrying for competition watchdogs than a “horizontal” merger boosting a firm’s market share. But a vertical tie-up can still risk blocking rivals’ access to suppliers or buyers, a process known as ‘foreclosure’.

Vestager said a careful examination was necessary given the size of the two companies.

“Even if it is a vertical integration, when you have market shares of this kind, in the high double digits, of course we have to be thorough in our analysis to make sure you don’t foreclose,” she said.

Also asked about possible competition hurdles for the purchase of the troubled Ilva steel plant in southern Italy by ArcelorMittal MT.AS, the world's biggest steelmaker, Vestager said it was a "very tricky case" but good cooperation so far with the Italian authorities boded well for the approval process ahead.

($1 = 0.8434 euros)

Reporting by Valentina Za; Editing by Greg Mahlich