LVMH bags remaining stake in Christian Dior
THE world’s top luxury company LVMH said yesterday that it plans take full control of Christian Dior in order to harness the “high growth potential” of “one of the world’s most iconic brands”, whose sales have doubled over the past five years.
LVMH, which already owns Christian Dior perfumes, said in a statement it had now agreed to buy Christian Dior Couture – the leatherware, Haute Couture, ready-to-wear, jewellery and shoes businesses – for 6.5 billion ($7 billion).
The announcement sent LVMH shares soaring on the Paris stock exchange, where they jumped by around 3 percent in a generally flat market.
At the same time, the Arnault family, who own 74 percent of the holding company, Christian Dior SA, would “demonstrate their commitment” by acquir- ing the remaining 26 percent.
That would streamline the current shareholder structure and help unlock synergies, LVMH finance chief JeanJacques Guiony told a telephone news conference.
Set up 70 years ago, Christian Dior Couture “is one of the most iconic brands worldwide”, LVMH said. It sells its range of goods “almost exclusively” in 198 luxury boutiques around the world.
Sales have doubled over the past five years and, last year, revenues amounted to more than billion, while underlying or operating profit totalled 270 million. At present, Christian Dior Couture is wholly owned by Christian Dior SA.
By making it a wholly owned subsidiary, LVMH would be able to unlock its “high growth potential”, it said.
The deal “will allow LVMH to incorporate one of the most emblematic brands worldwide. It will allow for the regrouping of Christian Dior Couture and Parfums Christian Dior brands”, the statement continued.
‘Source of growth’
“On the strength of its his- tory and favorable prospects, Christian Dior Couture will be a source of growth for LVMH,” it said.
“The development of Christian Dior Couture will be notably supported over the coming years by a new creative momen- tum and significant investments already completed, notably in America, China and Japan.”
In its part of the twofold deal, the Arnault Family Group would launch a public takeover offer to purchase the shares in Christian Dior SA it did not already own.
The bid will take the form of a cash offer of 172 per share, plus 0.192 shares in Hermes International, valuing the each share at 260, the statement said. That represented a premium of 14.7 percent over the closing share price on Monday and a premium of 18.6 percent over the average share price during the past month.
The boards of directors of Christian Dior and LVMH were “unanimously favourable” to the plans, LVMH said.
“This project represents an important milestone for the group,” said LVMH chief executive Bernard Arnault.
“The corresponding transac- tions will allow the simplification of the structures, long requested by the market, and the strengthening of LVMH’s Fashion and Leather Goods division. They illustrate the commitment of my family group and emphasise its confidence in the long-term perspectives of LVMH and its brands.”
Analysts also hailed the longawaited deal.
“We see a number of positives,” said Exane BNP Paribas analyst, Luca Solca.
“It adds a strong brand to the LVMH portfolio at a reasonable valuation and on an accretive basis and it reduces the risk of LVMH potentially buying ‘trophy assets’” which would dilute returns on capital, the expert said.
“The operation is being viewed positively by the markets,” because it will increase the theoretical value of the share, Daniel Larrouturou of Diamant Bleu Gestion said.