Yahoo Finance Luxury goods group LVMH in $14.5bn Tiffany takeover talks
The French luxury group LVMH has confirmed it has made a takeover approach for Tiffany & Co, reportedly valuing the famous US jeweller at $14.5bn (£11.3bn).
The owner of Louis Vuitton said it had held preliminary discussions with Tiffany, known for its diamond engagement rings and robin-egg blue gift boxes but there was no certainty a deal would be agreed.
If a deal does go ahead, it would be LVMH’s biggest acquisition to date, giving the French group its first major non-fashion American brand.
LVMH is the world’s largest luxury goods group, with brands including Christian Dior haute couture, Bulgari jewellery, Hublot watches and Veuve Clicquot and Krug champagne. It is owned by Europe’s richest man, Bernard Arnault.
Tiffany, which featured in the 1961 film Breakfast at Tiffany’s starring Audrey Hepburn, was founded in New York in 1837 by the 25-year-old Charles Lewis Tiffany and his friend John B Young, who opened a stationery and “fancy goods” emporium on Broadway. The Broadway store’s clean “American style” quickly became popular with New York women.
LVMH, renowned for its handbags and designer dresses, moved into “hard luxury” – jewellery and timepieces – in 2012 when it opened a jewellery boutique in Paris. Its prices range from £180 for a pair of V stud earrings to necklaces and rings encrusted with rare diamonds, which can cost more than $1m.
The Tiffany acquisition would bolster LVMH’s hard luxury arm, which includes Bulgari and Fred jewellery, and Hublot and Tag Heuer watches. It would allow it to compete better with its Swiss rival Richemont – the company behind Cartier, Montblanc, Piaget and other brands – which sells watches, jewellery and luxury pens.
Analysts at Jefferies said: “If a bid at this level, or indeed higher, was confirmed, it would be the largest M&A [mergers & acquisition] transaction to date for LVMH but one it could comfortably afford.”
They noted that in 2011, LVMH approached and acquired Bulgari in a similar manner, over the weekend. Alessandro Bogliolo, the chief executive of Tiffany, who is trying to reinvigorate the brand, was the chief operating officer of Bulgari at the time of the bid before exiting the following year.
Bogliolo’s strategy at Tiffany has involved targeting new millennial consumers, especially in China, lowering the cost of jewellery and launching new items more frequently.
The turnaround has been led by Reed Krakoff, the designer who transformed the struggling leather-crafter Coach into a $5bn handbag retail giant. He introduced a new range called Everyday Objects, which included a $165 pizza cutter and $425 protractors made of sterling silver. Tiffany also hired Lady Gaga, who wore its famed 128-carat yellow diamond on the red carpet at the 2019 Oscars.
LVMH released strong results earlier this month, with like-for-like sales up 11% year on year in its third quarter. It suffered a decline in revenue after the protests in Hong Kong but this was offset by a good performance in the rest of Asia, Europe and the US. LVMH had annual sales of almost $52bn last year, compared with Tiffany’s $4.4bn.
The Royal Bank of Canada analyst Rogerio Fujimori said: “Tiffany would become a better company and stronger competitor under the ownership of LVMH. This is illustrated by Bulgari’s tremendous success after being taken over in 2011 by LVMH.” Conversely, he said acquiring Tiffany makes strategic sense for LVMH because jewellery remains one of the most attractive categories in the luxury sector.
“Hard luxury is the only subsector where LVMH is not the leader (and we know that Mr Arnault likes to be always number 1),” he 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.”
