Two multinationals fighting in court to save their lives

Hi Hivers,

Most of you will know Ray-Ban but this is about the Ray-Ban parent company Essilor/Luxxotica and their competitor Grandvision who are big in Europe.

Imagine you are Essilor and you - BEFORE CORONA - offered 6 billion to take over a 75% Grandvision stake.

Then halfway the period of getting the green light of the (EU) authorities Corona closes almost all optic shops in both multinationals, shop sales drop to almost zero, tax payments are delayed and extra bank securities must be arranged on top of already high external debt and weak balance sheets full of intangible assets (goodwill from previous take overs is not a real asset).

So what do you do ?

You take back your offer ? Yes this is possible but a cash penalty of 400 million Eur must be paid by Essilor. The other option - to avoid the penalty - is to proove that Grandvision did not comply to the contract terms which is what Essilor is doing last quarter with yesterdays court ruling as a next step in this process.

What did happen in court?

The judge ruled that Essilor has no ground to blame Grandvision anything hence must return the administration that was secured earlier by a raid on the offices of Grandvision and its majority share holder HAL. Essilor blamed GV to not have provided enough detaisl about the corona steps taken by GV including not paying rent for the shops.

1-0 for Grandvision ?

No, there are no winnners here. Both companies are struggling to survive with new lock downs already appearing in Spain and France. Grandvision wants to get the 400 million which might help them survive (HAL will put the net proceeds back into Grandvision they already said) while Essilor tries to get rid of the deal completely and or delay any decission.

So where do investors stand?

The stockprice of Gandvision is going down gradually already weeks to now 23 EUR (down from the earlier offer price of 27 EUR) showing a decrease in belief the deal will be possible.

Much worse is that investors do not take into account the risk that one or both companies will default. I have taken in defensive positions - as said before - and have bought put options for October 2020.

Do you see similar take-over struggles due to the Corona virus ? Are your optic shops empty or full ?

to be continued Goldrooster

Posted Using LeoFinance