On 31 July, 2019 GrandVision N.V. announced that EssilorLuxottica S.A. and HAL Optical Investments B.V. have reached an agreement for the sale of HAL’s 76.72% ownership interest in GrandVision (the 'Block Trade Agreement'). Under the Block Trade Agreement, EssilorLuxottica will buy HAL’s shares for a price of €28.00 per share, to be increased by 1.5% to €28.42 if closing of the Transaction (the 'Transaction') does not occur within 12 months from the announcement date. GrandVision supports the Transaction under the terms of a support agreement with EssilorLuxottica (the 'Support Agreement').
Closing of the Transaction between EssilorLuxottica and HAL is subject to various conditions, including obtaining anti-trust clearance. The Transaction is expected to close within 12 to 24 months of the announcement date of 31 July, 2019. After the Transaction has been successfully concluded, EssilorLuxottica will launch a mandatory cash public offer (the 'Mandatory Public Offer') for all outstanding shares in the Company, in accordance with the applicable Dutch public offer rules.
The Block Trade Agreement provides for the purchase by EssilorLuxottica of the entire participation of HAL in GrandVision equal to 76.72% at a price per share of €28.00 payable in cash, to be increased by 1.5% to €28.42 if closing of the Transaction does not occur within 12 months from the announcement date, representing a total consideration of approximately €5.5 billion.
The purchase price of €28.00 per share as agreed between EssilorLuxottica and HAL represents the following premium to the undisturbed share price:
- A premium of 33.1% to GrandVision’s closing price on 16 July, 2019 of €21.04;
- A premium of 37.6% to GrandVision’s average volume weighted price for the one-month period up to and including 16 July, 2019 of €20.35; and
- A premium of 41.7% to GrandVision’s average volume weighted price for the three-month period up to and including 16 July, 2019 of €19.77.
Prior to the closing of the Transaction, GrandVision is permitted to pay dividends of up to €0.35 per share for 2019 and €0.37 per share for 2020 (or, in each case, 40% of net results if lower) without adjustment to the purchase price under the Block Trade Agreement.
Conditions and termination
The Transaction is subject to, among other things, approval from various anti-trust authorities and other third parties. EssilorLuxottica has committed to taking certain actions required to obtain merger clearance in each of the relevant jurisdictions, but it will not be required to consent to any remedies which may materially adversely affect the value of the combination of EssilorLuxottica and GrandVision as a whole, materially affect the strategic rationale of the Transaction or otherwise impose an unreasonable burden on either EssilorLuxottica or GrandVision.
In addition to the approvals mentioned above, the Transaction is subject to various other conditions including completion of mandatory consultation procedures with employee representative bodies, performance of the parties' obligations under the Block Trade Agreement, no breach of warranties, performance of the obligations by GrandVision under the Support Agreement, and the appointment conditional upon closing of four EssilorLuxottica nominees to the Supervisory Board. Furthermore, the Transaction is conditional upon GrandVision's net debt at Closing being less than €993 million.
In case of termination of the Transaction as a result of (i) failure to satisfy the condition to obtain approval from the relevant regulatory authorities by 30 July, 2021 (the 'Long Stop Date') or (ii) a breach of the agreement or a breach of warranties by EssilorLuxottica resulting in any closing conditions not being met, EssilorLuxottica shall pay termination compensation in the amount of €400 million to HAL. HAL and GrandVision have agreed that the after-tax amount of such termination compensation shall be contributed as share premium to GrandVision. In case the agreement is terminated as a result of the net debt of GrandVision being more than €993 million, HAL shall pay to EssilorLuxottica termination compensation in the amount of €100 million. HAL and GrandVision have agreed that, upon demand by HAL, GrandVision will pay such termination compensation to HAL.
The Block Trade Agreement and the Support Agreement may not be terminated as a result of a superior third party offer for the shares in GrandVision.
While the Transaction is between HAL and EssilorLuxottica, EssilorLuxottica has requested GrandVision's support for the Transaction and EssilorLuxottica acquiring control.
Together with external advisors, GrandVision reviewed the strategic, social, financial, legal and operational consequences of the proposed Transaction for GrandVision and its various stakeholders, and ING has issued a fairness opinion to the Management Board and Supervisory Board. On the basis of such review, the Management Board and Supervisory Board have concluded that providing support to the Transaction supports the ongoing, sustainable success of the business and is in the interest of GrandVision and its stakeholders. Mel Groot, HAL's representative on the Supervisory Board of GrandVision, did not partake in any deliberations or decision-making in relation to the Transaction.
In addition to a general commitment to support the Transaction, GrandVision more specifically agreed to cooperate with EssilorLuxottica in connection with (i) the anti-trust clearance process (including by offering certain remedies in order to obtain anti-trust clearance), (ii) the required filings for the Mandatory Public Offer, (iii) the financing of the Transaction (including the refinancing of GrandVision's existing debt), (iv) consultation procedures with employee representative bodies, (v) convening a general meeting in which EssilorLuxottica's nominees for the Supervisory Board can be conditionally appointed, and (vi) accepting certain restrictions in GrandVision's conduct of business until Closing, including with respect to M&A. In addition, GrandVision and EssilorLuxottica have each agreed to abstain from performing any actions that would reasonably be expected to materially prejudice or render more difficult closing of the Transaction. GrandVision believes it has considerable flexibility to continue executing its strategy as communicated during its Capital Markets Day in September 2018.
After closing of the Transaction and the Mandatory Public Offer, EssilorLuxottica intends to terminate GrandVision’s listing on Euronext Amsterdam and to acquire 100% of the shares of GrandVision pursuant to statutory buy-out proceedings or to obtain full ownership of GrandVision’s business through other second-step transactions. GrandVision acknowledges and agrees that it will be desirable that following the closing of the Transaction, EssilorLuxottica acquires full ownership of GrandVision and its business and has agreed that the Management Board and Supervisory Board will reasonably consider any reasonable proposals for such post-closing second-step transactions.
GrandVision and EssilorLuxottica have agreed that any related party transactions that are not in the ordinary course or at arm's length terms, require the affirmative vote of at least one independent member of the Supervisory Board of GrandVision. Such affirmative vote will be required until EssilorLuxottica holds all shares in GrandVision or has initiated statutory buy-out proceedings. EssilorLuxottica has furthermore agreed not to acquire any GrandVision shares or other securities before the launch of the Mandatory Public Offer.
It is envisaged that upon successful completion of the Transaction and until the earlier of EssilorLuxottica acquiring full ownership or initiating statutory buy-out proceedings, the Supervisory Board of GrandVision will be composed of four members to be identified by EssilorLuxottica and two current members of GrandVision's Supervisory Board.
Kees van der Graaf and Rianne Meijerman, qualifying as independent under the Dutch Corporate Governance Code. Van der Graaf will continue to serve as Chairman of the Supervisory Board.
EssilorLuxottica has expressed strong respect and appreciation for the current management team, and Stephan Borchert and Willem Eelman are committed to remain as CEO and CFO of GrandVision post-closing of the Transaction and the subsequent Mandatory Offer.
Timetable and Mandatory Public Offer
EssilorLuxottica and GrandVision will work together to obtain all necessary merger clearances. It is expected that it will take approximately 12 to 24 months before closing of the Transaction.
At, or prior to, the Annual General Meeting of Shareholders in 2020, GrandVision will propose the conditional appointment of four Supervisory Board members to be nominated by EssilorLuxottica. The appointment will be effective upon and subject to closing of the Transaction.
After closing of the Transaction and because EssilorLuxottica will obtain an ownership interest in excess of 30%, EssilorLuxottica will have the obligation to make a Mandatory Public Offer for all remaining outstanding shares of GrandVision. The price of the Mandatory Public Offer will be determined in accordance with Dutch law and will be at a minimum the price per share paid to HAL pursuant to the Block Trade Agreement (as it may be adjusted in accordance with the Block Trade Agreement). Settlement of the Mandatory Public Offer is expected to take place approximately six months after closing.