LVMH to take over Tiffany for $16.2 billion

Luxury concern LVMH will buy jeweler Tiffany for $16.2 billion.

Angela Charlton and Rachel Lerman reported the news for the AP:

French luxury group LVMH has agreed to buy iconic New York jeweler Tiffany & Co. for $16.2 billion, adding a famed star to its portfolio that already boasts Louis Vuitton, Christian Dior and Bulgari.

LVMH announced in a statement Monday that it will purchase the 182-year old Tiffany and its 300 boutiques worldwide at $135 a share. The agreed deal is higher than the $14.5 billion cash offer LVMH made last month.

Tiffany — known for its delicate jewelry, distinctive blue boxes and an Audrey Hepburn movie — says the deal will ensure its long-term sustainability. Tiffany, which is trying to transform its brand to appeal to younger and more digital shoppers, could use a company with deep pockets to help expand its business.

LVMH’s share price rose on the announcement, trading Monday up 2 percent at 403.50 euros.

Paris-based LVMH, led by billionaire Bernard Arnault, says the deal will strengthen its position in high-end jewelry and in the U.S. market. The purchase gives the French conglomerate a new star in its already distinctive portfolio — one that will help it compete with Gucci-owner Kering Group and Cartier-owner Richemont SA.

The Financial Times’ Arash Massoudi, Eric Platt, and Michael Pooler noted:

The deal, the largest ever in the luxury sector, comes a month after it emerged that LVMH had approached the jeweller, known for its diamond engagement rings, about a possible acquisition for $120 per share.

Last week, the French group increased its offer to $130 a share and was granted access to Tiffany’s books to conduct due diligence. The company’s share price closed last Friday in New York at $125.51. As recently as August, the stock was trading close to $80 a share.

The purchase price translates to an equity value of around $16.2bn, or €14.7bn, representing a premium of about 37 per cent over the $98.55 at which Tiffany’s shares closed on the last day of trading before its move became public. It will include some $350m in net debt.

Mr Arnault, who is chairman and chief executive of LVMH, said he was “delighted” to welcome a company with “an unparalleled heritage” into the group.

“We have an immense respect and admiration for Tiffany and intend 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 and look forward to ensuring that Tiffany continues to thrive for centuries to come,” he added.

Holly Ellyatt reported for CNBC that:

LVMH CEO Bernaud 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.”

LVMH shares were trading 1.4% higher Monday morning following the announcement. 

LVMH has built up a large portfolio of luxury brands across different retail sectors, from fashion to perfume. Some of its well-known brands include Moët & Chandon, Dom Perignon, Givenchy and Louis Vuitton.

The boards of both LVMH and Tiffany approved the deal on Sunday and the transaction is expected to close in the middle of 2020, subject to approval from Tiffany’s shareholders and regulatory approvals.

Tiffany was founded in New York in 1837 and became an iconic jewelry brand in the 20th century, but it has struggled with growth over the last several years. It experienced falling annual sales and profit since 2015, before a revenue turnaround in 2017. The jeweler has also pushed an expansion into China, but experienced a decline in sales in the U.S. and Asia from factors like the U.S.-China trade war.

LVMH has sweetened its bid for Tiffany from an original offer of $120 per share, made in October. That had been rebuffed by the company that said it significantly undervalued the jewelry maker. Shares of Tiffany, the iconic New York-based jeweler, have risen over hopes of a higher priced deal. Shares closed on Friday at $125.51. They had traded at about $140 in the middle of last year.