Milan: French lensmaker Essilor International SA agreed to buy Luxottica Group SpA, the maker of Ray-Ban sunglasses, for about €22.8 billion ($24 billion), combining the largest manufacturer and retailer in eyewear and solving management transition issues for the 81-year-old founder of Luxottica.

Luxottica investors will get 0.461 of an Essilor share for each share they own, the companies said in a statement Monday. The bid values Milan-based Luxottica at €47.07 a share based on Friday’s closing price for Essilor, 5 per cent lower than where Luxottica finished the week. Essilor gained as much as 19 per cent while Luxottica rose as much as 15 per cent.

Leonardo Del Vecchio, Luxottica’s founder and controlling shareholder, agreed to the deal and will lead the new company with equal powers as Essilor Chairman and Chief Executive Officer Hubert Sagnieres, 61. Luxottica has had difficulty retaining top management in past years, with two former CEOs resigning.

“The deal is excellent news for both stocks,” wrote Luca Solca, an analyst at Exane BNP Paribas, who said the acquisition solves the problem of who will run Luxottica next.

The deal creates a branded goods giant with a market value that rivals the second-biggest luxury maker Hermes International. The companies said they expect revenue and cost synergies of €400 million to €600 million in the medium term. Paris-based Essilor is the largest manufacturer in the industry and Luxottica the biggest retailer, according to Chris Cooper, an analyst at Jefferies.

Essilor Chairman and CEO Hubert Sagnieres, 61, will become executive vice-chairman and deputy CEO with powers equal to Del Vecchio’s. The combined company will have more than €15 billion in annual revenue. Del Vecchio will be the single largest shareholder, controlling a stake of between 31 and 38 per cent.

Del Vecchio’s Delfin investment company agreed to contribute its 62 per cent stake in Luxottica to Essilor in exchange for stock in the newly created group that will be listed in Paris. Essilor will then make a mandatory offer for the remaining Luxottica stock at the same exchange ratio. Mediobanca SpA advised Delfin, while Citigroup Global Markets and Rothschild worked for Essilor.

Luxottica, which also makes frames for luxury brands such as Armani, Chanel, and Prada, has a market value of about 24 billion euros as of Friday, with about €22 billion for lens maker Essilor. Luxottica, which owns the Sunglass Hut retail chain, also is developing voice-activated glasses that coach cyclists and runners.

“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.”

Luxottica increasingly competes with large luxury players such as Kering 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.

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 have been on a “collision course,” Exane said in a note in October as Luxottica moves into lens manufacturing while Essilor advances into frames and acquires control of online eyewear retailers. Lens manufacturing will be a big deal for Luxottica as it makes it independent for sun and prescription lenses, it said.

Luxottica announced last March it will seek to accelerate growth by investing more than €1.5 billion over three years.

Essilor shares surged 15 per cent to €117.30 at 9:13am in Paris, while Luxottica climbed 13 per cent to €56.15.