LVMH puts ring on Tiffany in $16.2bn union
PARIS: Luxury behemoth LVMH said yesterday that it had clinched a deal to buy the storied US jewelers Tiffany in a $16.2 billion deal, making the French firm a power player in fine gems just as demand is soaring worldwide. The deal comes after LVMH, already the top luxury firm overall, spent more than a month wooing Tiffany, one of the world’s most famous jewelry houses, known for its wedding rings and diamonds. “It is an emblematic brand, an American icon that will become a little bit French,” LVMH’s chief executive Bernard Arnault told AFP. “It has lots of potential and an incredible history.”
Tiffany, founded in 1837 and headquartered on glamorous Fifth Avenue in New York, has long symbolised tony American sophistication, most memorably in the 1961 film “Breakfast at Tiffany’s” starring Audrey Hepburn, based on the Truman Capote novella. The companies said in a statement that LVMH will acquire Tiffany for $135 a share in cash in a transaction with an equity value of approximately 14.7 billion euros or $16.2 billion.
The deal adds Tiffany to LVMH’s extensive stable of luxury brands that include Louis Vuitton, Dior and Moet & Chandon, and will strengthen its position in the United States. It also lets LVMH tap into a different type of luxury demand, from clients who view their purchase as more of an investment than an impulse buy. “These are clients who, unlike in fashion, are interested in permanence and buy a jewel to keep, but also to pass on,” Arnault told AFP. “When you buy a beautiful dress, it’s rare that after a few dozen years this dress will still seem contemporary,” he said.
Tiffany had been lagging behind its rivals in terms of sales growth in recent years, and is expected to benefit from LVMH’s extensive global network and promotional power. “Applying this marketing and communication machinery should go a long way in making Tiffany more relevant in design jewelry and watches,” said Luca Solca, an analyst at Sanford C. Bernstein, according to Bloomberg News.
The addition of Tiffany to LVMH’s jewelry holdings, which already include Bulgari, Chaumet, Tag Heuer and Hublot, vaults it past Swiss-based Richemont, which holds Cartier among other brands. Richemont led the pack with a 14.8 percent share of the luxury jewelry market in 2017, according to data from Euromonitor International. But with Tiffany at 10.8 percent and LVMH at 7.5 percent, combined they will now lead the segment.
LVMH began its public courting of Tiffany on Oct 15 with an offer of $120 per share. Last week it raised its bid to around $130, which convinced Tiffany to open its books to LVMH, which then offered $135 to clinch the deal. The company said further financial details would be released ahead of a conference call with analysts. Tiffany’s shares closed trading on Friday at $125.51. They were trading around $90 per share at the beginning of October, before LVMH first began to make overtures to Tiffany’s management.
LVMH shares were up 1.1 percent in afternoon trading at €400.75, and have climbed since the group first announced a bid for Tiffany, reaching a record high of €407.85 earlier this month. “Some companies in the retail sector have complained about softer demand, but luxury brands tend to hold up well when economies cool as the mega rich usually fare better in a cooler economic climate,” said David Madden at CMC Markets UK.
The boards of directors of both companies have approved the acquisition, with Tiffany’s board recommending that shareholders approve the transaction. The deal is expected to close in the middle of 2020 following approval by Tiffany’s shareholders and regulators. LVMH is the world’s largest luxury group, posting record sales of €46.8 billion in 2018, for a net profit of €7 billion. - AFP