French optical retailer EssilorLuxottica has reached an agreement to acquire Dutch company GrandVision in an all-cash deal. The deal could eventually be worth as much as 7.2 billion Euros. 

Over the years, it has been seen that when it comes to achieving consistent growth, then most of the large companies resort to acquisitions and more often than not, it works well. This is something that has worked well across a wide range of industries and it is no different when it comes to the optical retail business. In a new development, French eyewear company EssilorLuxottica made the announcement on Wednesday that the company has reached an agreement to acquire GrandVision, a Dutch optical retailer. The deal in question is going to be an all-cash transaction and over the long term, the entire value of the deal could be worth as much as 7.2 billion Euros.

It is interesting to note that only last year, EssilorLuxottica had been established after the merger between Luxottica and Essilor. However, the combined company is now back with another merger that could see it becoming one of the biggest all service optical retailers in the world. According to the details that have emerged so far, EssilorLuxottica is going to buy a 76.72% holding in GrandVision and it is going to pay 28 Euros for each share of the Dutch company. However, if the acquisition is not completed within a year, then the price of each share is going to go up to 28.42 Euros each and the total deal will then be worth 7.2 billion Euros. GrandVision shareholders are getting a substantial premium on their shares, which closed on Tuesday at a price of 25.36 Euros.

The executive chairman at EssilorLuxottica, Leonardo Del Vechhio, spoke about the deal and the company’s vision about the future. He said, “With GrandVision we will be able to develop our retail network, finally extended throughout the geographies, and fully enable our multichannel and digital platforms. We will raise the quality of in-store experience for products, brands, and services for the benefit of all consumers and our wholesale customers.” It is a significant deal and one that could have far-reaching consequences for the industry at large. However, it is going to be interesting to watch how the GrandVision stock reacts over the next few days.

If there is one industry that is known for having the thinnest of margins and also the exposure to a lot of risk with regards to rises in oil price, then it is the airline industry. Due to the low margins, airlines often try to continuously undercut each other by way of price wars, and ultimately, it can prove highly damaging for certain airlines. Lufthansa is one of the world’s biggest airlines, which operates on key international routes as well as on short-haul routes which are littered with budget airlines. The airline reported its earnings for the second quarter on 30 July and in a development that would come as a genuine shock, Lufthansa’s year on year profits plunged by as much as 70%.

The airline blamed the rising price of oil and the ongoing price war in the short-haul routes in Europe for the decline in profits. The total profits for the quarter stood at $252 million for the period from April until June. It goes without saying that the level of competition in the European airline industry has intensified significantly over the past few years and the persistent price wars have been a regular feature. In its statement, the company blamed, “Persistent overcapacities, aggressive competition and increasingly price-sensitive demand” While the price wars have definitely had their toll on the company’s bottom line, it goes without saying that Lufthansa’s costs have risen significantly as well.

The primary reason behind the rise in costs is due to the rising price of oil, and that has had a heavy toll on Lufthansa’s ability to maintain their margins. The airline revealed that is costs have increased by 7 percent year on year and in addition to that, the fuel bill in the second quarter rose by a whopping 255 million Euros from Q2 2018. The profit margins took an enormous hit as it went down by a massive 3 percentage points and for a company as big as Lufthansa, which is a significant drop. Lufthansa has stated that they are trying to reduce their costs in order to tackle the situation.

The world of investment can often throw up trends that can often confound market watchers, but at the end of the day, almost all of those trends are ultimately rooted to solid insights from the market at large. Restaurant stocks might be regarded as ‘alternative investment’ by many, but it is still a multibillion-dollar industry and a lot of money flows into these stocks ever year. When it comes to the best-performing stocks, one would expect global chains like McDonald’s or Starbucks to be at the top, but in 2019, a surprise has sprung up. Little known Thai restaurant After You has emerged as the best performing restaurant stock in 2019, having tripled its value in the year so far.

However, it is interesting to note that the restaurant is not involved in traditional Thai food. It deals with pancakes, puddings, and brownies.  Haidilao International Holding Ltd of China, which deals in hot pot and Chipotle Mexican Grill has been the next best performers among restaurant stocks this year. You is listed in the Market for Alternative Investment in Thailand, and it is, for now, a clear indication that the company is regarded as a small or medium-sized firm. However, the company has managed to become the biggest one in that market thanks to the astonishing rally that it has enjoyed this year.

The dessert restaurant chain was established back in 2007 and currently, it only has 36 stores. However, that has not stopped the company from competing against local dessert restaurant chains and outperforming them comfortably. More importantly, McDonald’s and Starbucks have significant footprints in Thailand. The company, however, might not be satisfied with only dominating its market. It is currently exploring the possibilities of expanding abroad. A Bualuang Securities Pcl analyst said,

“After You has very high growth potential based on its strong brand in the domestic market and overseas expansion plans. The upcoming earnings results will indicate the level and pace of the upside potential.”

The company is now flying high and the investor will be watching this company closely in the months to come.

The investment climate on a global level has not been particularly great over the course of the year so far, and there are some important factors which have contributed to it. While the United States-China trade way has had its impact on the markets, the refusal of the world’s biggest central banks to cut rates according to the expectations of most investors has been another issue. Two of the world’s most influential central banks, the European Central Bank and the United States Federal Reserve, meet this month to decide on the same in their jurisdictions. The ECB is going to have its meeting this week, while the Fed is going to have its meetings on the last two days of the month.

That being said, there is now optimism among European investors about the ECB cutting rates ahead of the Fed. Due to that optimism, the European markets opened marginally higher on Wednesday. The Stoxx 600 index that tracks all stocks across Europe opened slightly higher this morning, and according to analysts, it is ideation of the market sentiments with regards to the ECB meeting. The International Monetary Fund had recently downgraded its forecasts with regards to global growth. In such a situation, investors and institutions are looking for a boost from the world’s leading central banks.

There are widespread expectations that the ECB is going to cut rates by 10 basis points in order to stimulate investment and growth in Europe. On the other hand, the expectations of the United States Fed are higher. It is believed that the Fed is going to cut interest rates by as much as 25 basis points later on this month. Last week, the head of the New York Fed, John Williams, had sparked a lot of optimism in the markets after he suggested at an event that the Fed should cut rates by 50 basis points. Later on, a spokesperson had stated that it was not a policy recommendation from John Williams, and as soon as the news came in, the markets tanked again.

Over the past few months, investors had been clamoring for a rate cut from the United States Federal Reserve, but nothing too radical has been forthcoming thus far. The head of the New York Fed John Williams stated last week about the possibility of lowering rates by as much as 50 basis points at the meeting that is going to be held from 30-31 July. However, the New York Fed then rowed back on his comments and categorically stated that those comments were not related to policymaking in any way. The stocks in Asia had risen last week after those comments, but on Monday, the Asian stocks have fallen as investors pulled away from their money from the markets.

The MSCI index, which tracks shares in the Asia Pacific region, except for Japan, was down by 0.1%. On the other hand, the Shanghai Composite Index Hong Kong’s Hang Seng and KOSPI of South Korea, all recorded declines of 1.1%, 0.9%, and 0.1% respectively. The reaction comes after the Wall Street Journal reported that the rate cuts that are going to take place are going to be by around 25 basis points. The markets had expected cuts of as much as 50 basis point after the comments from John Williams.

On the other hand, the trade war between the United States and China continues to be a factor in this regard. A forex strategist working for IG Securities stated that any inflammatory comments from US President Donald Trump could trigger further declines this week. He said,

“A factor which could guide stocks lower this week are tweets by U.S. President Donald Trump pertaining to trade issues with China. Stocks could decline if he continues to make challenging trade comments directed at China this week.”

The price of crude oil went up after the tensions in the Middle East spilled over during the weekend. A British oil tanker had been captured by the Revolutionary Guard of Iran and that has caused a renewal of the tensions has that had affected the region throughout the year so far.