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LVMH inks US$2.6b deal to buy Belmond
LVMH HAS agreed to acquire Belmond in a deal that values the operator of high-end hotels and New York's '21' Club at US$2.6 billion.
The deal, LVMH's largest transaction since taking full control of Christian Dior for more than US$7 billion last year, pushes the Louis Vuitton owner further into high-end services amid rising concern about the sustainability of the Chinese demand that's driven the industry's growth.
The French company agreed to pay US$25 a share in cash for London-based Belmond, a 42 per cent premium over Belmond's closing price in the US on Thursday.
The acquisition is one of LVMH founder Bernard Arnault's biggest, rivalling the purchases of Bulgari and Loro Piana.
The Paris giant's shares fell as much as 3.1 per cent early on Friday. They are down 18 per cent since September on concern that Chinese buyers who account for about a third of industry sales and a majority of growth don't have room in their closets for more leather goods and fashions.
Luxury-industry revenue is likely to grow 5 per cent in 2019, slowing from a rate of more than 10 per cent this year, according to analysts at Goldman Sachs.
The agreement ends a four-month sale process as Belmond sought to take advantage of a strong hospitality market.
The company said in August it hired Goldman Sachs Group and JPMorgan Chase & Co for a strategic review. Analysts speculated a sale could involve breaking up the company's assets, since its properties could be of value as trophies for ultra-wealthy investors including sultans and oligarchs.
Chairman Roland Hernandez last month called the review "robust" and said management was encouraged by the interest potential bidders were showing.
The company's shares have soared 58 per cent since Aug 8, at one point reaching their highest level since 2008. They closed at US$17.65 a share in New York trading on Thursday.
LVMH, owner of Champagne maker Dom Perignon, is a surprise winner for Belmond. Among those weighing an offer for all or part of the company were KSL Capital Partners, Blackstone Group, KKR & Co and Ashkenazy Acquisition Corp, people familiar with the matter told Bloomberg in October.
The deal will expand the French company's high-end hospitality offerings.
LVMH formed a hotel management group in 2010 to oversee its operations in the sector, which include properties under the Cheval Blanc name in locations like the Courchevel ski resort in the French Alps.
LVMH's Bulgari jewelry brand has six hotels, including one in Shanghai that opened in July. It plans to open hotels in Moscow, Paris and Tokyo in the next four years.
Belmond, which used to be known as Orient-Express Hotels, owns or has stakes in more than 30 high-end hotels around the world, including Hotel Caruso on the Amalfi Coast in Italy and the Grand Hotel Europe in St Petersburg, according to company filings. BLOOMBERG