Meta Platforms Inc. (NASDAQ:META) is in advanced discussions to acquire a minority stake in EssilorLuxottica SA, the manufacturer of Ray-Ban sunglasses. This move marks Meta’s intensified effort to push into the smart glasses market, a sector crucial to its augmented and virtual reality ambitions.
Strategic Investment for Meta Smart Glasses
Meta, which has been collaborating with EssilorLuxottica on Ray-Ban Meta smart eyewear, is considering a stake of between 3% and 5% in the luxury eyewear group. Valued at approximately €4.5 billion ($4.9 billion) at current market prices, this investment would deepen Meta’s partnership with the world’s largest eyewear company and potentially provide greater influence over a business critical to its AR and VR strategies.
Regulatory Clearance and Market Reaction
The discussions, initially reported by the Financial Times, have already received clearance from US antitrust authorities for Meta to buy up to a 5% stake. This regulatory approval is a significant step forward for the deal. EssilorLuxottica shares rose 2.3% to €194.20 following the news, while Meta shares gained 1.1% to $467.27.
Meta’s Commitment to AR and VR
By investing in EssilorLuxottica, Meta aims to strengthen its position in the competitive AR and VR markets. This move is expected to bolster its efforts against rivals like Snap Inc. (NYSE:SNAP) and Apple Inc. (NASDAQ:AAPL), both of which are heavily invested in mixed-reality technologies. Snap has been experimenting with mixed-reality spectacles for years, and Apple released its Vision Pro headset earlier this year.
Meta’s History of Strategic Investments
This potential stake in EssilorLuxottica would not be Meta’s first significant investment. In 2020, Meta acquired about 10% of Reliance Industries Ltd.’s Jio Platforms for $5.7 billion, becoming its largest minority shareholder. This partnership aimed to expand Meta’s presence in India, capitalizing on the growing demand for online payment and e-commerce driven by smartphone adoption.
Meta’s Vision for the Metaverse
Meta has heavily invested in the metaverse, an envisioned future internet made up of immersive virtual worlds accessible via headsets. CEO Mark Zuckerberg has promoted the metaverse as the next major computing revolution after mobile phones. The company even changed its name from Facebook to Meta to reflect this strategic focus.
Market Analysts’ Perspective
Bloomberg Intelligence analysts Mandeep Singh and Nishant Chintala suggest that Meta’s investment in EssilorLuxottica signals a doubling down on its AR and smart glasses initiatives. Unlike its Oculus VR platform, Meta does not own the hardware platform for AR. The analysts believe that AR units, although currently smaller in volume compared to VR, could grow at a much faster rate due to the potential for smart glasses to serve as interfaces for AI and virtual assistant functionalities.
EssilorLuxottica’s Broader Strategy
In addition to its partnership with Meta, EssilorLuxottica has been expanding its portfolio. The company recently announced an agreement to purchase streetwear label Supreme from VF Corp. for $1.5 billion in cash, adding another lifestyle brand to its collection, which includes Oakley sunglasses.
Future of Meta Smart Glasses
Meta unveiled its first Ray-Ban smart glasses in partnership with EssilorLuxottica in 2021. These glasses, set in the iconic Wayfarer frame, allowed users to take photos and videos, listen to music, and answer calls. The newer models incorporate MetaAI, an AI assistant based on Meta’s Llama artificial intelligence model.
Featured Image: Freepik
