Commentary

LVMH's Courtship Of Tiffany Results In $16.2B Deal

After sweetening its initial offer  considerably over the last month, the French luxury conglomerate LVMH Moët Hennessy Louis Vuitton SE has won the hand of New York-based Tiffany & Co., both companies confirmed this morning. 

LMVH is paying $135 per share, valuing Tiffany at about $16.2 billion. That figure “represents a 7.5% premium over Tiffany’s closing share level on Friday, and is more than 50% higher than where the stock price stood before LVMH’s interest emerged,” Reuters’ Sarah White writes.

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The boards of both companies approved the deal Sunday. It is expected to close in mid-2020, depending on approval from Tiffany’s shareholders and regulators.

“Tiffany and LVMH both confirmed in October that they were in talks to combine after Paris-based LVMH reached out with an unsolicited initial offer of $14.5 billion.… The deal is one of the largest in the history of the luxury sector and in the career of LVMH CEO Bernard Arnault, Europe’s richest man,” Michelle Toh writes  for CNN Business

“LVMH’s purchase of Tiffany marks the group’s first acquisition of a non-fashion American brand. Other U.S. brands owned by LVMH include Marc Jacobs, Benefit Cosmetics and Kat Von D Beauty,” Isabel Togoh observes  for Forbes

“Founded in 1837, [Tiffany] employs more than 14,000 people and operates about 300 stores.… LVMH has 75 brands, 156,000 employees and a network of more than 4,590 stores,” the BBC reports.

“Arnault is challenging Cartier owner Richemont for dominance in the global jewelry business. While LVMH’s stable of 75 brands includes Christian Dior fashion and Dom Perignon Champagne, the company hasn’t been as prominent in jewelry as in fashion or cosmetics. Acquiring Tiffany would more than double LVMH’s jewelry scale and boost its market share to more than 18%, according to Bloomberg Intelligence analyst Deborah Aitken,” Bloomberg’s Robert Williams, Marthe Fourcade and Rachel Evans report.

“‘Tiffany makes sense for LVMH because of the scarcity of acquisition targets with global scale and brand appeal in jewelry, the least-crowded category in the luxury sector,’ wrote Rogerio Fujimori, an analyst at RBC Europe,” they point out.

“The fame of Tiffany, founded in 1837 and known for its trademark duck egg blue boxes, was cemented by the 1961 film 'Breakfast at Tiffany’s,' starring Audrey Hepburn. But that allure has faded  in recent years,” point out  Arash Massoudi, Eric Platt and Michael Pooler for Financial Times, which broke the news of the done deal last night.

“Several advisers working with luxury companies questioned the logic behind a deal, asking why would Mr. Arnault buy a business that had fallen off the list of top-tier brands. Beyond appearances, Tiffany’s business has also had to cope with the impact of lower spending by tourists and a strong U.S. dollar,” they continue.

“Arnault said that the company intended ‘to develop this jewel with the same dedication and commitment that we have applied to each and every one of our Maisons. We will be proud to have Tiffany sit alongside our iconic brands,’” CNBC’s Holly Ellyatt writes.

“Tiffany has been trying to boost its brand since pushing out its CEO two years ago and, under current boss Alessandro Bogliolo, has expanded into China and moved into gemstones and gold jewelry in attempt to lure in younger and more global clients,” Barbara Kollmeyer writes for MarketWatch.

“Tiffany has been focused on executing on our key strategic priorities to drive sustainable long-term growth. This transaction, which occurs at a time of internal transformation for our legendary brand, will provide further support, resources and momentum for those priorities as we evolve towards becoming The Next Generation Luxury Jeweler,” Bogliolo states in the news release announcing the agreement.

“‘A takeover of Tiffany could make a lot of sense,’ analysts at Bernstein wrote in a research note last month. While Tiffany is one of the world's best-known luxury brands, analysts say it still has room to grow, particularly in jewelry and watches. And LVMH’s deep pockets could help Tiffany turn around after a rocky few years, and fuel its effort to better connect with millennial consumers,” CNN Business’ Toh writes.

“'We believe TIF’s brand equity and the strength of the image of its iconic 1837 Blue Box are more valuable than the current financials suggest and that LVMH can leverage off these to launch a more concerted ‘attack’ on the Asian millennial market (which would include a rethinking of the current product mix and its U.S. footprint in our view),' said Flavio Cereda, equity analyst at Jefferies, in a note released before the deal was announced,” MarketWatch’s Kollmeyer reports.

conference call originating in Paris is scheduled for 9 a.m. ET.

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