Luxury goods giant LVMH eyes $20b Tiffany takeover

Tiffany chief executive Alessandro Bogliolo has emphasised a strategy of building sales in China.
A portrait of Tiffany & Co founder Charles Lewis Tiffany at Tiffany's Fifth Avenue flagship store in New York in 2017. Few jewellers can claim as much of a hold on American culture as the company, which was famously memorialised by both author Truman Capote and actress Audrey Hepburn in the book and movie versions of Breakfast At Tiffany's.PHOTO: NYTIMES
A portrait of Tiffany & Co founder Charles Lewis Tiffany at Tiffany's Fifth Avenue flagship store in New York in 2017. Few jewellers can claim as much of a hold on American culture as the company, which was famously memorialised by both author Truman
Tiffany chief executive Alessandro Bogliolo has emphasised a strategy of building sales in China.

LVMH confirms it is in talks on possible deal; US jeweller Tiffany is said to have hired advisers to review offer

PARIS • LVMH, the world's biggest luxury group, said yesterday that it had approached Tiffany & Co about a possible takeover of the United States jeweller, famed for engagement rings and other jewellery packaged in its signature robin's-egg-blue boxes.

"In the light of recent market rumours, LVMH Group confirms it has held preliminary discussions regarding a possible transaction with Tiffany," the company said in a statement.

"There can be no assurance that these discussions will result in any agreement."

One source familiar with the matter said LVMH - which owns the Louis Vuitton brand, among others - had proposed a bid valuing Tiffany at about US$120 per share. That would be equivalent to a US$14.5 billion (S$19.8 billion) acquisition offer, which would make it the acquisitive French group's biggest purchase to date.

That would be a sharp premium to Tiffany's current share price, which closed at US$98.55 last Friday.

Cash-rich LVMH did not give any financial details. The French company also owns the Bulgari jewel and watch brand, Sephora cosmetics stores, Hublot watches and Dom Perignon champagne.

Another source familiar with the situation said the French group had submitted a preliminary, non-binding offer to Tiffany earlier this month.

LVMH shares were up 1 per cent in early trading, touching highs last seen in July.

"LVMH has ample financial capacity for a deal and we also expect many strategic and financial synergies," analysts at Cowen said in a note.

Tiffany - which, according to the sources, has hired advisers to review LVMH's offer but has yet to respond and may not negotiate a deal - has been caught out by the US-China trade war as Chinese tourists spend less in US shopping hubs.

That has pressured its sales in recent quarters, as it tries like its rivals to push further into mainland China to capture the shift in spending patterns as Chinese clients splurge more at home.

  • $98.55

    Tiffany's share price in US dollars last Friday.

    $120

    Bid in US dollars per share that LVMH is believed to have offered for Tiffany.

    $14.5b

    The acquisition offer in US dollars, based on US$120 per share. This would make it the biggest purchase to date for LVMH.

Still, jewellery is more broadly emerging as one of the brightest and fastest-growing spots in the luxury goods sector.

Shares in European watch and jewellery companies were among the top gainers in Europe in early deals after news of LVMH's interest in Tiffany.

Pandora was up 2.8 per cent, while Salvatore Ferragamo was the biggest gainer on the Italian bourse, up 3.7 per cent, and Swatch and Richemont topped the Swiss market, up 1.6 and 1.9 per cent respectively at 0841 GMT.

LVMH rival Kering has been looking to expand in this area too, including by launching high-end jewellery lines for its fashion brand Gucci.

Meanwhile, Switzerland's Richemont, a sector leader with labels like Cartier, has also been adding to its portfolio - it recently acquired Italy's Buccellati.

Tiffany, founded in 1837 and a storied name in jewellery, is one of the sector's top prizes. Its headquarters sits in a famous Fifth Avenue building in Midtown Manhattan.

 

Few jewellers can claim as much of a hold on American culture as the company, famously memorialised by both author Truman Capote and actress Audrey Hepburn in the book and movie versions of Breakfast At Tiffany's.

More than two years ago, Tiffany ousted its chief executive - who had come from LVMH - after facing pressure over its lacklustre financial results. Its current chief executive, Mr Alessandro Bogliolo, has emphasised a strategy of building sales in China.

"Tiffany is potentially the biggest prey and the only US global luxury brand," analysts at Jefferies said.

REUTERS, NYTIMES

A version of this article appeared in the print edition of The Straits Times on October 29, 2019, with the headline 'Luxury goods giant LVMH eyes $20b Tiffany takeover'. Print Edition | Subscribe