  Luminous red novae (LRN) are a class of optical transients believed to
originate from the mergers of binary stars, or "common envelope" events. Their
light curves often show secondary maxima, which cannot be explained in the
previous models of thermal energy diffusion or hydrogen recombination without
invoking multiple independent shell ejections. We propose that double-peaked
light curves are a natural consequence of a collision between
dynamically-ejected fast shell and pre-existing equatorially-focused material,
which was shed from the binary over many orbits preceding the dynamical event.
The fast shell expands freely in the polar directions, powering the initial
optical peak through cooling envelope emission. Radiative shocks from the
collision in the equatorial plane power the secondary light curve peak on the
radiative diffusion timescale of the deeper layers, similar to luminous Type
IIn supernovae and some classical novae. Using a detailed 1D analytic model,
informed by complementary 3D hydrodynamical simulations, we show that
shock-powered emission can explain the observed range of peak timescales and
luminosities of the secondary peaks in LRN for realistic variations in the
binary parameters and fraction of the binary mass ejected. The dense shell
created by the radiative shocks in the equatorial plane provides an ideal
location for dust nucleation consistent with the the inferred aspherical
geometry of dust in LRN. For giant stars, the ejecta forms dust when the
shock-powered luminosity is still high, which could explain the infrared
transients recently discovered by Spitzer. Our results suggest that
pre-dynamical mass loss is common if not ubiquitous in stellar mergers,
providing insight into the instabilities responsible for driving the binary
merger.
