Third Point sees EssilorLuxottica generating over $1.1 billion in profits.

Third Point, the activist hedge fund run by Dan Loeb, has built a $700 million stake in Ray-Ban maker EssilorLuxottica. It revealed this in its third-quarter investor letter.

The fund also said it saw plenty of potential for growth and profits at EssilorLuxottica, the world’s largest eye-wear company.

Third Point on its EssilorLuxottica investment

The fund wrote: “EssilorLuxottica has many of the key characteristics we look for in an investment: compelling end-market growth in a defensive category, strong market share, high returns on invested capital, potential for incremental capital deployment, and competitive moats created by brands and technology.”

Third Point said EssilorLuxottica had the potential to generate more than 1 billion euros ($1.1 billion) in profit.  EssilorLuxottica is a “merger-between-equals” of France’s Essilor International SA’s and Italian company Luxottica Group SpA.

Governance issues at EssilorLuxottica

However, the $48 billion merger has been plagued by a battle for supremacy between Luxottica’s founder Leonardo Del Vecchio and Essilor’s chief Hubert Sagnieres.

Last November, Del Vecchio sought to install his right-hand man and Luxottica Chief Executive Francesco Milleri as the next CEO. That’s when the dispute spilled out into the open.

Last May the two sides agreed to cease fire, and assigned Milleri and Laurent Vacherot, EssilorLuxottica’s current CEO, the responsibility for implementing the merger integration and set its future strategy.

“A deadlocked board and management team has slowed integration and strategic decision making,” Third Point said in its investor letter. “Despite its many advantages, EssilorLuxottica is losing favor among shareholders who are frustrated by the lack of synergy realization.”

Third Point is planning to pressure EssilorLuxottica to resolve its management disputes.

[Related Story: Sony Rejects Loeb’s Proposal to Spin Off the Semiconductor Business ]