LVMH puts ring on Tiffany in US$16b marriage

Paris

LVMH has agreed to buy Tiffany & Co for more than US$16 billion in the largest luxury-goods deal ever, raising the French conglomerate's profile in jewellery and giving it access to a broader swath of American shoppers.

The owner of the Louis Vuitton brand agreed to pay US$135 a share for the US jeweller, according to a statement on Monday.

That values Tiffany at 37 per cent above the closing price before Bloomberg reported an initial US$120-a-share approach on Oct 26. Boards of both companies approved the proposal on Sunday.

LVMH chairman Bernard Arnault is challenging Cartier owner Richemont for dominance in the global jewellery business.

While LVMH's stable of brands includes Christian Dior fashion and Dom Perignon Champagne, the company hasn't been as prominent in jewellery as in fashion or cosmetics. Acquiring Tiffany changes that.

"It will become the luxury jewellery global-market leader," Bloomberg Intelligence analyst Deborah Aitken wrote in a recent report.

The acquisition is set to more than double LVMH's jewellery scale and boost its market share to more than 18 per cent, she said. The all-cash deal is expected to close in the middle of 2020.

The deal cements a successful streak for Mr Arnault's firm, with LVMH's stock price quadrupling during the past eight years.

To fuel growth, the billionaire, who is Europe's richest person, has embraced acquisitions, spending more than US$12 billion across 19 deals since the start of 2016.

Yet even with that spree, LVMH has lagged behind Richemont in luxury jewellery, a significant area of growth in emerging markets such as China. LVMH's last major deal in that area was in 2011, when it acquired the Bulgari brand.

Tiffany's shares have traded steadily above the initial offer price since Bloomberg News first reported the talks late last month.

LVMH raised its bid for Tiffany at least twice before coming to an accord, bolstering its offer to US$130 just days ago, according to people with knowledge of the situation.

While the company dwarfs Tiffany, with sales of about US$50 billion, some analysts had predicted that LVMH might need to pay even more, with price targets of US$140 at Credit Suisse and US$160 at Cowen.

The revised price tag may reflect the changing fortunes of Tiffany, where its chief executive officer Alessandro Bogliolo has cut back on entry-priced gifting options and revamped its marketing to target younger shoppers after a difficult period when the firm lost track of consumer trends.

Offerings from the 182-year-old brand include US$165 heart-shaped earrings, as well as top-end options like a US$165,000 diamond chain. BLOOMBERG