Czech billionaire offers €30bn for the holding behind EssilorLuxottica

Michal Strnad has offered about €30 billion ($33.5 billion) to buy Delfin Sarl, the family holding that controls EssilorLuxottica SA. The Czech arms billionaire's letter, dated 20 October, values the Luxembourg-based holding at a 30% discount to its net asset value.

Strnad would accept a controlling stake of 62.5%, one he could reach by assembling shares from the eight heirs who each hold 12.5% of Delfin. The offer was sent to Delfin chief executive Romolo Bardin and remains valid for 30 days.

Delfin's publicly listed holdings carry a market value above €40 billion. They include a stake of nearly one-third in EssilorLuxottica, the maker of Ray-Ban frames, alongside positions in Italian financial companies such as insurer Assicurazioni Generali and the banks UniCredit and Banca Monte dei Paschi di Siena.

Any deal would require all eight shareholders to approve changes to the ownership restrictions, a significant hurdle. Leonardo Maria Del Vecchio, one of the eight heirs, confirmed to Bloomberg that he had seen the offer and said he would continue to "protect and safeguard what my father built."

Leonardo Maria said he wants ownership of Delfin to remain Italian and for EssilorLuxottica to stay attached to its roots. "My father's life work must remain an asset for Italy," he said in a statement, also pointing to stability within the country's banking system.

EssilorLuxottica is a global leader in eyewear, formed from the merger of Essilor and Luxottica, and our map of luxury conglomerates notes that it controls roughly 80% of branded eyewear while making glasses for most major fashion houses under licence.

The bid lands amid escalating tensions between the heirs to founder Leonardo Del Vecchio. Some family members have wanted to sell, while Leonardo Maria has tried unsuccessfully to buy out his siblings and has publicly criticised the stewardship of both Delfin and EssilorLuxottica.

The 31-year-old recently offered €3.5 billion to buy half-brother Rocco Basilico's stake, an approach rejected on Thursday, according to Bloomberg and others. Earlier he sought to buy out two more siblings, triggering a falling out with Delfin chairman Francesco Milleri, a confidant of his father.

In his letter, Strnad said Delfin "perfectly fits with my investment approach and strategy." He added that he had secured funding for the offer, which would need no additional financing of his own.

"I am looking for long-term investment opportunities in companies operating or investing in businesses positioned at the top of their value chain and capable of generating recurring and resilient cash flows," Strnad wrote.

Strnad is the second-richest person in the Czech Republic, with a net worth estimated at $17.5 billion by the Bloomberg Billionaires Index. His offer would be the largest acquisition of an Italian financial and industrial holding by a single foreign buyer.

He already has a footprint in Italy. His CSG NV defence group owns the ammunition maker Fiocchi Munizioni, and this year he took a 14% stake in tyre maker Pirelli & C SpA, which he described as a long-term investment rather than a maximum holding.

We covered the mapped holdings of luxury's quieter giants last year, and EssilorLuxottica is at the centre of that second tier. The present dispute is not about the eyewear business itself but about the family vehicle that is above it.

The discount is the hard figure in the letter. Offering 30% below net asset value for a controlling interest in Delfin prices in the blockages among the heirs, the ownership restrictions and the refusal of at least one shareholder to sell at any price.

The heir's counterweight

Leonardo Maria's public statement is the strongest signal yet that Strnad's letter will not find a swift committee of sellers. His rejection, blended with the requirement for unanimous approval, means the Czech billionaire's 30-day window opens onto what may be a very long negotiation.

The eyewear business behind the dispute operates modern manufacturing halls where rows of spectacle frames move under bright light, and the holding above it controls the company that makes frames for most of the luxury industry's licensed names.

Strnad has not said what he would do with Delfin's banking and insurance positions if he gained control. His letter frames the holding as a cash-generating investment, but the Italian lenders inside it carry their own regulatory and political weight.

The offer runs for 30 days from the letter, a clock already ticking towards the end of November. Whether any of the other seven heirs will engage, or Leonardo Maria will attempt a counter-offer of his own, is the next fact to watch.

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Images: EssilorLuxottica