Coverage: LVMH offers $14.5 billion for Tiffany

French luxury giant LVMH has offered $14.5 billion for Tiffany & co in what could become its biggest acquisition.

Sarah White and Sudip Kar-Gupta reported the news for Reuters:

LVMH, the world’s biggest luxury group, said on Monday it had approached Tiffany & Co about a possible takeover of the U.S. jeweller.

“In light of recent market rumours, LVMH Group confirms it has held preliminary discussions regarding a possible transaction with Tiffany,” the company said in a statement. “There can be no assurance that these discussions will result in any agreement.”

One source familiar with the matter said LVMH, which owns the Louis Vuitton and Bulgari brands among others, had proposed a bid valuing Tiffany at about $120 per share. That would be equivalent to a $14.5 billion acquisition offer – which would make it the acquisitive French group’s biggest purchase to date.

That would be a sharp premium to Tiffany’s current share price, which closed at $98.55 on Friday.

Cash-rich LVMH did not give any financial details.

Ben Dumett from MarketWatch, however, reported the offer was all-cash:

The French company sent Tiffany officials a letter in the last couple of weeks outlining an all-cash takeover bid of roughly $120 a share, according to people familiar with the matter.

The companies aren’t in talks but Tiffany is expected to work quickly on a response, some of the people said. Even though the bid represents a premium of 30% or more above where Tiffany traded when it was made, according to one of the people, LVMH is expected to have to pay up if it wants to clinch the deal. New York-based Tiffany’s stock closed at $98.55 Friday, giving it a market value of nearly $12 billion, and reached nearly $140 a share during the summer of 2018.

LVMH has a market value of EUR193 billion ($214 billion).

Buying Tiffany would increase Paris-based LVMH’s exposure to jewelry, one of the fastest-growing businesses in the luxury sector. The global market grew 7% and was worth about EUR18 billion in 2018, according to Bain & Co. Tiffany, with more than 300 stores globally, is one of the world’s largest jewelers, along with Cartier and LVMH-owned Bulgari, but it has been unable to keep pace with European rivals.

Ed Hammond, Ruth David, and Dinesh Nair of Bloomberg News broke the story and wrote:

“Tiffany could prove an interesting fit to LVMH, which is still underpenetrated in jewelry,” said Deborah Aitken, senior luxury-goods analyst at Bloomberg Intelligence. With branded jewelry growing at about 6% a year — about 200 basis points faster than high-end watches — she said buying Tiffany could help LVMH compete against companies such as Swiss rival Richemont SA, the owner of Cartier and Van Cleef & Arpels.

Tiffany is expected to reject the offer as undervalued, the Financial Times reported Sunday, citing people familiar with the matter.

If successful, though, the purchase would be the biggest deal yet for LVMH founder and Chairman Bernard Arnault, Europe’s richest man. An acquisition would give LVMH an iconic 182-year-old U.S. brand known for its robin’s egg blue boxes and its role as a favorite haunt of Holly Golightly in Truman Capote’s “Breakfast at Tiffany’s.” The French company also owns the Bulgari jewel and watch brand, Sephora cosmetics stores, Hublot watches and Dom Perignon Champagne.