The Cole National Acquisition - Luxottica · that the integration with Cole National's operations...
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The Cole National Acquisition The Cole National Acquisition October 2004 October 2004 A Key Step Towards Continued Growth A Key Step Towards Continued Growth
Transcript of The Cole National Acquisition - Luxottica · that the integration with Cole National's operations...
The Cole National AcquisitionThe Cole National AcquisitionOctober 2004October 2004
A Key Step Towards Continued GrowthA Key Step Towards Continued Growth
Safe Harbour Statement
Certain statements in this slide presentation and its discussion mayconstitute "forward-looking statements" as defined in the U.S. PrivateSecurities Litigation Reform Act of 1995. Such statements involve risks,uncertainties and other factors that could cause actual results to differmaterially from those which are anticipated. Such risks anduncertainties include, but are not limited to, fluctuations in exchangerates, economic and weather factors affecting consumer spending, theability to successfully introduce and market new products, the ability toeffectively integrate recently acquired businesses, the ability tosuccessfully launch initiatives to increase sales and reduce costs, theavailability of correction alternatives to prescription eyeglasses, risksthat the integration with Cole National's operations will not succeed ascurrently planned, that expected synergies from the acquisition of ColeNational will not be realized as planned, that the combination ofLuxottica Group’s managed vision care business with Cole National'swill not be as successful as planned, as well as other political,economic and technological factors and other risks referred to in theGroup’s filings with the U.S. Securities and Exchange Commission.These forward-looking statements are made as of the date hereof, andLuxottica Group does not assume any obligation to update them.
Rationale for the Acquisition
?Enhance leadership in key retail market
?Format and commercial model highlycomplementary to existing NorthAmerican retail business
?Gaining competitive advantage inimportant MVC market
?New channels, opportunities forlearnings: licensed brands, franchising
(1) MVC = Managed Vision Care
Description of the Transaction
?Price per share including interestaccrued: US$ 27.72
?Total consideration US$ 717.3m?Diluted Equity Consideration: US$ 497.4m
?US$ 219.8m1 in assumed net debt(US$ 64.0m in cash and US$ 283.8m in gross debt,including US$ 275m face value of outstanding highyield bonds)
?Financed with existing credit facilitiesand cash on hand
(1) As of 7/31/04, according to Cole National 1H04 accounts
The New Luxottica Optical RetailBusiness in North America(1)
AssociatesAssociatesAssociates StoresStoresStores Managed VisionCare
Managed VisionManaged VisionCareCare
Owned3,617
Licensed1,337
Franchised481
Total: 5,435(2)
Pro-Forma 2003 Net Revenues: US$ 3.2 billionPro-Forma 2003 Net Revenues: US$ 3.2 billionPro-Forma 2003 Net Revenues: US$ 3.2 billion
Approx. 34,000Associates
(2) North America only; Includes 728 Things Remembered stores
# 2 MarketPosition
(1) As of end of fiscal year 2003
Store Base: 5,435(2)
Sun &Watches
1,633Optical3,074
939
877
265
133
860
SearsOptical
LensCrafters
PearleVision
TargetOptical
BJ'sOptical
1,633
SunglassHut/Watch
Station/WatchWorld
(3)
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(2) North America only; Includes 728 Things Remembered stores
The New Luxottica Optical RetailBusiness in North America(1)
(3) Owned: 379; Franchised: 481(1) As of end of fiscal year 2003
Impact on FY ’04E Group Results
Impact onGroup
Profitability
Impact onImpact onGroupGroup
ProfitabilityProfitability
• Neutral in 2004• At most, €0.01 dilution on consolidated EPS• FY 2004E EPS: €0.64, US$0.80(1)
Impact onGroup
Leverage
Impact onImpact onGroupGroup
LeverageLeverage
• Leverage(2) remains conservative and in line withlong-term targets• Pre-transaction: 2.3X (as of 6/30/04)• Post-transaction: 2.9X (as of 12/31/04)
Next Stepson ColeNationalBonds
Next StepsNext Stepson Coleon ColeNationalNationalBondsBonds
• Currently evaluating options to optimise debtstructure of combined companies• Ability to redeem 2007 bonds; 2012 bond
callable as of 2007
(1) US$ - Euro = 1.25 exchange rate (2) Net Debt / LTM EBITDA; LTM = latest twelve months
Strategy for Success
? Maximum leverage of learnings from past retail and MVCacquisitions
? Hands-on leadership? Management, field leaders traveling throughout the Cole National
organization to meet people, get to know systems, processes, operations
? Learning from those who work the business
? Flexibility and adaptability
? Highest level of involvement from senior Group and LuxotticaRetail NA management? Address issues promptly, quick decision making
? Weekly conference calls, meetings, updates
? Strong integration team already in place? 80 leaders from all areas of the organization
? 20+ team leaders in Twinsburg as of yesterday
ExtractingExtractingOtherOther
SynergiesSynergies
• Distribution, warehouse, ITplatforms
• Product and manufacturing• Increased leverage with
suppliers and landlords• Licensed brands• Franchising• Lab networks
First StepsFirst Steps
Steps to High Value Creation
ExtractingOther
Synergies
ExtractingExtractingOtherOther
SynergiesSynergies
• Distribution, warehouse, ITplatforms
• Product and manufacturing• Increased leverage with
suppliers and landlords• Licensed brands• Franchising• Lab networks
Areasof
Opportunity
AreasAreasofof
OpportunityOpportunity
• New optical businessmodels• Brand positioning,
product mix, price point,etc.
• Managed vision care: ~ 50%of the U.S. optical market(1)
• Leverage the experience,retail brands and productofferings of two leadingmanaged vision careorganizations
• Develop new products• Panel strategy
• And much, much more ...
(1) Source: Jobson Vision Watch, Others
ExtractingOther
Synergies
ExtractingExtractingOtherOther
SynergiesSynergies
• Distribution, warehouse, ITplatforms
• Product and manufacturing• Increased leverage with
suppliers and landlords• Licensed brands• Franchising• Lab networks
First StepsFirst StepsFirst Steps
• Consolidate Cole Nationalcorporate, MVC andservice center operationsto Luxottica Retail NA HQ
• Keep appropriateresources focused on thebase businesses• Retail store and field
management operationsto operate as usual
• Things Remembered tobe managed separately• key holiday season
ahead
Next Steps
?Early 2005? Detailed business plan following 2004 year-end
earnings announcement
? Senior management investor roadshow
? Updated Group guidance for 2005 including ColeNational
?Ongoing quarterly updates
? Luca Biondolillo, Director, Corporate Communications
? Tel. +39 (02) 8633 4668
? Email: [email protected]
? Alessandra Senici, Manager, Investor Relations
? Tel. +39 (02) 8633 4662
? Email: [email protected]
Luxottica Group Investor & Media Contacts
