25 Nov, 2019
LVMH reaches deal to acquire Tiffany for $16.3 billion
LVMH has clinched a deal to buy Tiffany & Co for $16.6bn, handing control of the upmarket American jeweller to the luxury group controlled by Europe’s richest man Bernard Arnault. The two companies confirmed on Monday morning that they had entered into an agreement for LVMH to buy Tiffany for $135 per share in cash, following a Financial Times report that the bidder had been convinced to raise its takeover offer by about $600m.
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.
Chairman of Tiffany’s board of directors, Roger Farah, said the transaction delivered a «compelling price with value certainty» to its shareholders. 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. 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 US dollar.
For LVMH, however, the acquisition would deepen its presence in jewellery, allowing it to compete in the category more closely with the likes of Switzerland’s Richemont in one of the fastest-growing categories in the personal luxury goods sector. Tiffany, which has a considerable footprint in the US and remains popular with Asian consumers, would sit in a portfolio that includes Bulgari, the Italian jeweller, which Mr Arnault acquired in 2011 for $5.2bn. LVMH’s stable of brands includes Louis Vuitton, Dior and Sephora. For the full year to the end of July, Tiffany reported revenues of $4.4bn, down nearly 1 per cent from a year ago, and net income of $561m, an increase of 13 per cent. The company employs over 14,000 staff, according to Capital IQ.