June 21 (Bloomberg) -- Shares of Luxottica Group SpA and Oakley Inc. rose the most in more than two years after Luxottica agreed to buy Oakley for $2.03 billion to add sports sunglasses to the Italian company's Ray-Ban and Ralph Lauren brands.

Oakley's investors will receive $29.30 a share, 16 percent higher than yesterday's closing price, the company said in a statement. Oakley's 57-year-old founder, Jim Jannard, may get $1.3 billion for his 44.4 million shares.

The U.S. company, whose shades are endorsed by cyclist Lance Armstrong and golfer Annika Sorenstam, will lower Milan- based Luxottica's annual costs by 100 million euros ($134 million) by 2010. The bid follows PPR SA's offer for Puma AG this year as premium sports brands command higher prices. Oakley's newest Nanowire styles sell for $300.

``Nobody can touch Luxottica now,'' said Gianluca Pacini, an analyst with Caboto Equity Research in Milan, who has a ``buy'' rating on the shares. ``It's the industry's No. 1 player, with the sports brands, luxury brands and optical retailers.''

Luxottica has posted seven straight quarters of rising profit by adding licenses to make luxury sunglasses for Burberry Group Plc and Polo Ralph Lauren Corp. in the last two years as demand in the U.S. and emerging markets surges.

The Italian company's shares jumped 1.94 euros, or 7.4 percent, to 28.18 euros in Milan trading. It last rose as much in May 2003.

`Best Acquisition'

``This is maybe one of the best brand acquisitions Luxottica has made,'' said Alessandro Capuano, a trader with IG Markets in London. ``One of the areas Luxottica was lacking was sunglasses for sports.''

Oakley's shares added $3.24, or 13 percent, to $28.47 at 11:08 a.m. in New York Stock Exchange composite trading. It was the biggest jump since April 2005. The shares climbed 57 percent in the past 12 months, boosted by first-quarter profit that tripled and takeover speculation. Italy's La Repubblica newspaper reported Luxottica was interested in buying Oakley earlier this month.

Jannard founded Oakley out of a garage in 1975 with $300, making rubber motorcycle handgrips that held better when covered in sweat, according to the company's Web site.

Oakley, which says its Foothill Ranch, California, headquarters have ``absolutely no adult supervision,'' expanded when Jannard's patented goggles were endorsed by motorcycle- racing professionals and his sunglasses were used by triathletes and volleyball players.

Retail Sales

Luxottica runs about 5,500 optical shops around the world. Oakley had 2006 sales of $761.9 million and 3,400 employees.

Luxottica also owns LensCrafters and Pearle Vision retail chains. Oakley runs the Bright Eyes and Sunglass Icon chains.

Oakley Chief Executive Scott Olivet and President Colin Baden were invited to join Luxottica. The companies didn't say whether Jannard would have a role.

Jannard was chief executive officer from 1999 until September 2005, when he was replaced by Olivet, a former Nike Inc. executive. Since then, Jannard has held the titles of chairman and ``chief mad scientist.''

The U.S. company's first-quarter profit tripled to $5.7 million as sales rose 31 percent to $199 million. Oakley's other brands include ski goggles and Oliver Peoples luxury eyewear.

Sports brands are moving into the luxury market and vice versa, with Prada SpA promoting its Prada Sport brand and PPR, the French owner of Gucci Group, bidding more than $7 billion for German sneaker maker Puma in April.

Tour de France

Greg LeMond won the Tour de France in 1986 wearing a pair of Oakley Factory Pilots, also known as ``Lights.'' Athletes have sought the glasses because they can be worn all day in direct sunlight without causing eye strain or headaches.

Luxottica's first-quarter profit rose 24 percent to 128.3 million euros, buoyed by sales of branded glasses. Sales increased 6.7 percent to 1.3 billion euros.

Luxottica signed a 10-year agreement with Burberry in October 2005 and started selling Ralph Lauren glasses in the first quarter. Chief Executive Officer Andrea Guerra has said he expects to be selling Tiffany & Co. shades by early 2008.

Guerra has ``kept his word'' by fulfilling promises to buy companies outside Italy to improve profitability, said Francesco Vercesi, who runs $64 million as managing director of Sopaf Capital Management in Milan. ``Management's credibility has an excellent impact on the shares.''

Luxottica will pay for Oakley with operating cash flow and loans. It received investment advice from Rothschild Inc. and legal advice from Winston & Strawn LLP. Oakley was advised by Goldman Sachs and hired the law firm Skadden, Arps, Slate, Meagher & Flom LLP.

The companies expect the transaction to be completed in the second half of 2007.

To contact the reporter on this story: Vivek Shankar in San Francisco at vshankar3@bloomberg.net; Sara Gay Forden in Milan at sforden@bloomberg.net.

Last Updated: June 21, 2007 11:14 EDT