Staff of Reuters 3 minutes Read this article (Adds comment from broker, background, updates share price) (Reuters) – MILAN, June 30 (Reuters) – Safilo Group’s stock dropped as much as 17% on Wednesday after the Italian eyewear company announced plans to raise up to 135 million euros ($161 million) in cash by issuing new shares to repay a high-cost loan and strengthen its finances. Safilo has been harmed by LVMH’s decision to terminate license arrangements with the Italian spectacle maker in order to establish its own joint venture in the eyewear industry. Safilo was stripped of the famous Dior license at the start of the year, and will be stripped of the Fendi license on Thursday. Safilo, the world’s second-largest eyewear manufacturer, has also faced increased competition from Luxxottica, which has merged with Essilor, the world’s largest lens manufacturer, to form Essilor Luxxottica. Luxottica The capital increase is intended to repay a 90 million euro loan from Safilo’s owners, which was used to fund two acquisitions made last year. HAL Holding NV, Safilo’s largest shareholder, has agreed to subscribe to the cash call in order to keep its 49.84 percent ownership in the company. Blenders Eyewear and Prive Goods, two U.S. eyewear businesses with a strong online presence, were purchased by Safilo to help rebuild its portfolio. “We were able to complete two key acquisitions on time in 2020, thanks in part to the shareholder financing made available by HAL,” CEO Angelo Trocchia stated in a statement. “Now is the time for us to repay this loan, to close a chapter, and to look forward to future prospects.” The motion will be voted on by Safilo shareholders at an extraordinary meeting on July 30. By 0830 GMT, shares were down 13.2 percent against a 1% drop in Milan’s all-share index. In a research note, BestInver predicted that the stock would see some short-term pressure following the news, noting that the transaction would drastically cut the company’s debt charges while also making it easier to obtain additional bank financing. Safilo claims it will save 9 percent in interest payments for each year of the loan’s remaining term, which ends in 2026. (1 dollar = 0.8410 euros) (Elvira Pollina and Valentina Za contributed reporting, while Louise Heavens edited the piece.) Continue reading