LVMH Moët Hennessy Group, the French luxury goods conglomerate owned by Europe’s richest man Bernard Arnault, has confirmed it had made a surprise offer to buy U.S. jewelry giant Tiffany.
An LVMH statement this morning said: “In light of recent market rumours, the LVMH Group confirms that it has held preliminary discussions regarding a possible transaction with Tiffany.”
Adding that negotiations are still at an early stage, LVMH added, “There can be no assurance that these discussions will result in any agreement.”
The Financial Times reports that the opening offer was worth around $14.5 billion, valuing Tiffany at a 22% premium to its market value and more than 30% above its average price over the last month.
The U.S. jeweler is likely to reject this first offer, but Arnault is expected to return with $16.5 billion. The deal would mark another big international acquisition by a French luxury group, and the first of a non-fashion American brand.
LVMH’s bid could trigger a response from François Pinault’s Kering luxury group (Gucci, Yves Saint Laurent, Balenciaga, Alexander McQueen), which was rumored to be interested in the iconic American jeweler, and Richemont, the owner of Cartier watches and jewelry.
Michael Hewson, chief market analyst at CMC Markets UK, told France 24: “His attempt to put a $14.5 billion ring on Tiffany, having already added Bulgari a couple of years ago is likely to take the fight in this sector to its closest rival Richemont, who own Cartier, and would help LVMH in gaining better access to US markets.”
The Royal Bank of Canada analyst Rogerio Fujimori told Forbes: “Tiffany would become a better company and stronger competitor under the ownership of LVMH,” citing jewelry firm Bulgari’s tremendous success after being taken over in 2011 by LVMH.
Fujimori adds: “Hard luxury is the only subsector where LVMH is not the leader (and we know that Mr Arnault likes to be always number one).” The RBC luxury goods equity analyst said: “Jewellery is the least-crowded category in the sector, with only a handful of truly global players, and Tiffany has a proven brand equity in Asia, where it has consistently ranked among the top three jewellery brands in our Chinese consumer surveys over the years.”
Last fiscal year, Tiffany generated $4.4 billion sales and $790m EBIT at an 18% margin. Tiffany, Fujimori confirms, has very little debt.
LVMH knows Tiffany’s CEO Alessandro Bogliolo very well from his role as COO of Bulgari between 1996-2012, before becoming Sephora North America COO in 2012-2013.
With an estimated net worth of $102.4 billion, Arnault has been keen to expand his influence into new areas of luxury.
In December last year Arnault surprised analysts by jumping to the luxury hospitality sector with the acquisition of Belmond Ltd., owners, part-owners or managers of 46 luxury hotel, restaurant, train and river cruise properties.
The $3.2 billion transaction expanded the company’s hotel holdings, putting the Belmond properties alongside LVMH’s current Cheval Blanc “Maisons” in the ski resort of Courchevel and the group’s of Bulgari hotels in Shanghai, Milan, Bali, London, Beijing and Dubai.
Sources from: Forbes