LVMH just announced on its website that it has reached an agreement to acquire Tiffany for US$16.2 billion dollars, at $135 per share.
That’s a lot of jewelry (around the price of a Ford-class aircraft carrier, with a few billion dollars in change), but it’s yet another feather to LVMH’s cap, which has been steadily acquiring companies to become the juggernaut that it is today, headed by Europe’s richest man, Bernard Arnault. In the luxury segment, LVMH is the proverbial 800-pound gorilla, comprising 75 top brand names in Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry, retail and hospitality. It posted more than $50b in revenues last year; to give a sense of scale, the Richemont Group and Swatch Group did $12b and $8b, respectively. For a family-run group, LVMH could not be further from the image of a mom-and-pop.
From news reports, the bid for Tiffany was first made in October, around the time when Arnault with President Trump cut the ribbon at a new handbag factory in Texas. The offer then was for $14b. This was raised last week to $130 a share (close to $16b) last week, which granted LVMH access to Tiffany’s books. They must have liked what they saw, as this was raised to $135 per share, at which the deal was made. As reported in the Financial Times, Tiffany’s shares traded at $125.51 last Friday, and around $80 per share in August.
Tiffany is an iconic company founded in 1837; qualifies as a grand dame, but one that has lost a bit of its lustre in recent years, what with a strong US dollar and declining sales which the boost from its China adventure was not enough to overcome. For the 12 months ended July, Tiffany made $561m in profit, an increase of 13 percent, on revenues of $4.4b. Scooping up Tiffany gives LVMH yet more leverage in jewelry, identified as one of the fastest growing categories in the luxury sector.
The acquisition of Tiffany has been approved by the boards of directors of both companies and the transaction is expected to close in the middle of 2020.
About this same time last year, LVMH bought the hospitality group Belmond for $2.6 billion. Happy shopping.