The $24 billion deal between the maker of Ray-Ban sunglasses and lensmaker Essilor will result in the world’s largest online contacts and eyewear retailer.

French lensmaker Essilor International SA agreed to buy Luxottica Group SpA, the maker of Ray-Ban sunglasses, for about 22.8 billion euros ($24 billion) in stock, combining the largest manufacturer and retailer in eyewear and creating an e-commerce contacts and eyewear powerhouse.

Luxottica Group ranks No. 86 in the Internet Retailer 2016 Top 500 Guide, with 2015 online sales estimated at $450 million. Coastal Contacts Inc., which is owned by Essilor International, is No. 126 with estimated online sales of $269.5 million. Had the two companies been combined in 2015, online sales for the merged entity would have easily topped those of 1-800 Contacts Inc., the leading contacts and eyewear seller in the 2016 Top 500 rankings and No. 84 overall, with an estimated $458.6 million in web sales.

A spokeswoman for Luxottica Group declined to comment on how the merger might affect the online strategy of the combined operation.

Essilor also owns e-retailers FramesDirect.com and EyeBuyDirect.com, along with MyOnlineOptical, a turnkey e-commerce engine that enables American eyecare professionals to offer an online complement to their in-store offerings. 

The deal comes after some management upheaval at Luxottica Group. In February Luxottica Group co-CEO Adil Mehboob-Khan resigned, becoming the third leader the company had lost in the previous 15 months, and was replaced by Del Vecchio. That followed the October 2014 resignation of CEO Enrico Cavatorta due to disagreements on corporate governance. Cavatorta had only been in the role for about a month, following the departure of Andrea Guerra after a decade at the helm.

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Leonardo Del Vecchio, who created Luxottica in 1961 and controls 62% of its stock, will be executive chairman and CEO of the combined business, which will be named EssilorLuxottica, the companies said Monday in a statement. Essilor CEO Hubert Sagnieres, 61, will be executive vice chairman and deputy CEO with powers equal to Del Vecchio’s. Essilor shares gained as much as 19% while Luxottica rose as much as 15%.

Four years after talks began, Del Vecchio, an 81-year-old Italian billionaire, said he’s achieving his dream of combining the two companies, while also solving a protracted succession puzzle for the operator of Sunglass Hut retail chain. Del Vecchio has said he didn’t want to bring any of his six children into the company.

“This operation would be a perfect fit on paper as both groups are leading their respective categories,” said Cedric Rossi, an analyst at Bryan Garnier & Co. “Nevertheless, two main question marks remain at this stage: EssilorLuxottica might face antitrust barriers, and management appointments in newcos are quite complicated.”

The sale of Luxottica, Italy’s fourth-largest publicly traded company by market value, means the country is losing another multinational corporation. ChemChina bought tiremaker Pirelli & C. SpA in 2015 and the Pesenti family last year ceded control of cement producer Italcementi SpA.

Luxottica makes frames for luxury brands such as Armani, Chanel and Prada, and is the biggest eyeglass retailer, with chains including Lenscrafters, Pearle Vision and Sunglass Hut. Essilor is No. 1 in lenses, and also has been expanding in eyewear retailing via acquisitions.

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The transaction should generate cost savings and increased revenue of 400 million euros to 600 million euros a year within about three to four years, Sagnieres said. The combined company will have more than 15 billion euros in annual revenue. Del Vecchio will be the single largest shareholder, controlling a stake of between 31-38%.

“This is a merger where they will be able to complement each other and create economies of scale on the supply chain,” said Catherine Lim, a Bloomberg Intelligence analyst. “Luxottica is a licensee of major branded eyewear while Essilor has been more focused on making lenses.”

EssilorLuxottica will be able to overcome antitrust hurdles, because its combined revenue would only account for about 16% of the market, Del Vecchio said on a call with analysts. However, the new company will have more than 50% of the sunglasses market and be the largest maker of spectacle frames, lenses and ready-made reading glasses, according to Jasmine Seng, an analyst at Euromonitor.

Luxury competitor

Luxottica increasingly competes with large luxury players such as Kering, No. 147 in the Internet Retailer 2016 Europe 500, in a global eyewear industry worth about $121 billion last year, according to data from Euromonitor. The company’s expansion into lenses is attractive amid rising consumer demand and as the segment offers high margins, according to Bloomberg Intelligence.

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Demand for eyewear is expanding in emerging markets with more than 2.3 billion people in Asia, Africa and Latin America needing optical frames, according to Exane BNP Paribas.

The two companies had been on a “collision course,” Exane said in a note in October as Luxottica moved into lens manufacturing while Essilor advanced into frames and acquired online eyewear retailers. Lens manufacturing will be a big deal for Luxottica as it makes it independent for sun and prescription lenses, it said.

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