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Nov 25, 2019

LVMH to buy Tiffany for US$16B in largest luxury-goods deal ever

France's richest man adds Tiffany to his luxury brands roster

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LVMH agreed to buy Tiffany & Co. for more than US$16 billion in the largest luxury-goods deal ever, raising the French conglomerate’s profile in jewelry and giving it access to a broader swath of American shoppers.

The owner of the Louis Vuitton brand agreed to pay US$135 a share for the U.S. jeweler, according to a statement Monday. That values Tiffany 13 per cent above an initial US$120-a-share bid. Boards at both companies considered the proposal on Sunday.

The all-cash deal marks the biggest-ever takeover for LVMH Chairman Bernard Arnault — Europe’s richest person — as he challenges Cartier owner Richemont for dominance in the global jewelry business. While LVMH’s stable of 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 changes that.

“It will become the luxury jewelry global-market leader,” Bloomberg Intelligence analyst Deborah Aitken wrote in a recent report as the takeover was discussed. The acquisition is set to more than double LVMH’s jewelry scale and boost its market share to more than 18 per cent, she said.

Luxury Gains

The largest deal in the luxury industry cements a successful streak for Arnault’s firm, with LVMH’s stock price quadrupling during the past eight years. To fuel growth, LVMH has embraced acquisitions, spending more than US$12 billion across 19 deals since the start of 2016, according to Bloomberg Intelligence.

Yet even with that spree, LVMH has lagged behind Richemont in luxury jewelry, a significant area of growth in emerging markets such as China. LVMH’s last major deal in that area was in 2011, when it acquired the Bulgari brand.

Deal Details

LVMH raised its bid for Tiffany at least twice before coming to an accord, bolstering its offer to US$130 just days ago, according to people with knowledge of the situation. While the company dwarfs Tiffany, with sales of about US$50 billion, some analysts had predicted LVMH might need to pay even more, with price targets of US$140 at Credit Suisse and US$160 at Cowen.

The revised price tag may reflect the changing fortunes of Tiffany, where Chief Executive Officer Alessandro Bogliolo has cut back on entry-priced gifting options and revamped its marketing to target younger shoppers after a difficult period when the firm lost track of consumer trends.

Offerings from the 182-year-old brand include US$165 heart-shaped earrings, as well as top-end options like a US$165,000 diamond chain.

Tiffany’s shares have traded steadily above the initial offer price since Bloomberg News first reported the talks Oct. 26, closing at US$125.51 a share on Nov. 22. LVMH shares have risen 3.2 per cent during the same period.