LVMH does not rule out raising Tiffany bid, say sources

Tiffany’s board asked LVMH to reconsider its bid.
Tiffany’s board asked LVMH to reconsider its bid.PHOTO: AFP

NEW YORK (AFP) - French luxury giant LVMH has not ruled out raising its initial US$14.5 billion (S$19 billion) offer to take over US jeweller Tiffany, sources close to the deal told AFP on Friday (Nov 8).

The two groups resumed their stalled talks this week after Tiffany's board asked LVMH to reconsider its bid, which the sources said Tiffany believed was too low.

The owner of Louis Vuitton, Dior and Moet & Chandon revealed late last month it was exploring a takeover of Tiffany, most famous for its fine diamonds and luxury silver wedding and engagement rings.

The deal would be among the largest ever for LVMH, giving it a much bigger presence in the United States.

"Raising the price is more than feasible," said one of the sources.

A second source, however, said it was unlikely the new offer would stretch as far as the US$135-US$140 per share sought by Tiffany's board.

LVMH's initial offer was for US$120 per share, which values the company at around US$14.5 billion.

If LVMH raises its offer, however, the sources said Tiffany would be prepared to enter exclusive negotiations with the French group - which would give LVMH access to the accounts of its target.

Both sides were said to be eager to reach a deal.

Contacted by AFP, LVMH offered no comment. Tiffany did not initially respond to a request for comment.

Tiffany, founded in 1837 and headquartered on glamorous 5th Avenue in New York next to Trump Tower, is the most iconic of US luxury brands, an image reflected in the Breakfast At Tiffany's novella by Truman Capote, made into a film with Audrey Hepburn in 1961.

Some analysts think a slight boost in price could close the deal.

"We do not see a risk of a counter-bid from a strategic investor or private equity," said a note from HSBC. "We think LVMH is likely to seal the deal if the group manages to sweeten it slightly, especially as Tiffany shareholders are likely to put pressure on the board to keep discussions open."

British hedge fund Egerton Capital, which held 3.9 per cent of Tiffany shares at the end of June, confirmed to AFP that it supports the LVMH deal.

The deal would add to LVMH's jewellery holdings, which includes Bulgari, Chaumet, Tag Heuer and Hublot, establishing the company as a worthy rival to Richemont, which holds Cartier among other brands, lifting its stature in the important American market.

Tiffany has been criticised by analysts for lacklustre sales growth in recent years.

A note from Bernstein said Tiffany scored organic revenue growth of 2 per cent in the last three years while peers have seen 7 per cent growth.

"Tiffany missed completely the formidable growth and value creation of the luxury industry over the last few years," said Bernstein, adding that rejecting LVMH's offer with the premium would be a "very risky bet" and could expose the Tiffany board to "serious shareholder anger" if results continue to languish.

Shares of Tiffany were unchanged early Friday at US$125.01, while LVMH dipped 0.3 per cent to €402.65 in Paris.