A lot of people were surprised when the world's biggest eyewear company said it had a deal to acquire one of the world's hippest.
"Hell Freezes Over," one Wall Street analyst headlined his report Thursday. "Luxottica to buy Oakley."
Oakley Inc. of Foothill Ranch and Luxottica Group of Milan, Italy, have been fierce rivals and even legal foes. If the $2.1-billion purchase goes through, they'll be kin by the end of the year, and America's two favorite eyewear brands -- Oakley and Ray-Ban -- will be under the same roof.
"We were competitors," said Andrea Guerra, Luxottica's chief executive. "Today we're creating something bigger."
Investors were happy at the prospect of the sleek Italians, who make sunglasses for fashion houses such as Chanel and Prada, teaming with the sporty Californians, whose shades are endorsed by athletes such as skateboarder Ryan Sheckler and golfer Annika Sorenstam.
Oakley's shares climbed $3.22, or almost 13%, to $28.45 on Thursday and Luxottica's stock rose $3.18, or 9%, to $38.02.
Under the terms of the deal, Luxottica will pay Oakley stockholders $29.30 a share, a 16% premium over Wednesday's close.
Oakley founder Jim Jannard, who started out in 1975 making motorcycle handgrips before moving on to goggles, could reap about $1.3 billion for his stake in the company. Jannard, 57, will continue as chairman and "chief mad scientist," a spokesman said, and headquarters will remain in Foothill Ranch.
About 1,600 of Oakley's 3,400 employees work there in what the company website calls "the design bunker," a 600,000-square-foot fortress with reinforced blast walls, a 400-seat auditorium, an NBA basketball court and lobby decor that includes a military jump seat, a drag-racing car and a torpedo.
Scott Olivet, Oakley's CEO, suggested that little would change in Foothill Ranch.
"My management team will report to me as usual," Olivet said. "The only change is my board speaks English and I'm going to learn Italian now."
Jannard, who is on the Forbes 400 list of richest Americans, said in a statement that Luxottica had "come to understand the unique, rogue nature of Oakley in the eyewear industry and is committed to preserving it."
In a note to clients, Brean Murray Carret & Co. analyst Eric M. Beder said he was surprised that Jannard, who owns more than 65% of the company, agreed to the sale. But uniting the businesses "makes tremendous sense," giving Oakley a much broader international platform and other advantages.
The two companies began feuding in 2001 after Luxottica bought Sunglass Hut, which was Oakley's biggest customer. Sunglass Hut scaled back its orders and Oakley's sales slumped, so Oakley expanded its offerings at other chains and started its own.
Then Oakley sued Luxottica, as well as its Sunglass Hut, LensCrafters, Ray-Ban Sun Optics, Arnette and Revo units, accusing them of infringing Oakley patents. The suit was settled four years ago.
The bad blood faded fairly fast -- Morningstar Inc. analyst T.K. MacKay called the Sunglass Hut row "a lover's quarrel" -- and the two CEOs said Thursday that they had worked well together in recent years. Oakley's sunglasses have been top sellers in Sunglass Hut stores.
Luxottica's Guerra said the deal would merge his firm's fashion savvy and knowledge of the luxury industry with Oakley's strength in performance and technology and would fuel Oakley's growth opportunities.
"I think Oakley will be larger," Guerra said. "I think this is basically the simple definition of what will happen."
The union would help Oakley, which last year bought the high-end Oliver Peoples sunglass chain in its effort to reach out to females, Olivet said. The company, which sold unisex sunglasses but had a distinctly macho vibe for most of its history, launched its first full line of sunglasses for women this spring.
"Luxottica today is the leading expert around the world in eyewear for women," Olivet said. "So we think their expertise, their direct work with the best designers around the world and their understanding of women's shopping patterns and needs can only help us get better at what we've started to do.
"The No. 1 priority in the partnership is to be able to drive the success and the initiatives we have currently underway."
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At a glance
Headquarters: Foothill Ranch
Chairman: Jim Jannard
Products: Sunglasses, prescription eyewear, sports goggles, apparel, watches
2006 Revenue: $761.9 million
Headquarters: Milan, Italy
Chairman: Leonardo Del Vecchio
Brands: Ray-Ban, LensCrafters, Pearle Vision, Sunglass Hut
2006 Revenue: $5.9 billion
Source: Times research