Fashion potential
LVMH bags Christian Dior Couture
The world’s top luxury company LVMH said last week it plans to 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-towear, jewelry and shoes businesses – for 6.5 billion euros ($7.0 billion).
The announcement sent LVMH shares soaring on the Paris stock exchange, where they jumped by around three 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 acquiring the remaining 26 percent, LVMH said.
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 2 billion euros, while underlying or operating profit totaled 270 million euros.
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 history 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 momentum and significant investments already completed, notably in the US, China and Japan.”
In its part of the two-fold 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 euros per share, plus 0.192 shares in Hermes International, valuing the each share at 260 euros, 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 favorable” to the plans, LVMH said.
“This project represents an important milestone for the group,” said LVMH Chief Executive Bernard Arnault. “The corresponding transactions 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 emphasize its confidence in the long-term perspectives of LVMH and its brands.”
Analysts also hailed the long-awaited deal.
“We see a number of positives,” said Luca Solca, Exane BNP Paribas analyst.
“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, he added.
“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.