PARIS (BLOOMBERG) - LVMH, owner of the Louis Vuitton brand, has agreed to buy Tiffany & Co for US$16.2 billion (S$22.1 billion) in the largest deal ever for the luxury sector.
Tiffany, the 182-year old New York jeweller, currently employs 14,000 people and operates 300 stores around the world. Its little blue boxes remain an iconic symbol, while its Fifth Avenue flagship store in Manhattan has gone down in cinematic history as the site of the 1961 movie Breakfast At Tiffany's starring Audrey Hepburn.
LVMH agreed to pay US$135 a share for Tiffany, according to a statement on Monday (Nov 25). That values Tiffany 13 per cent above an initial US$120-a-share bid.
The all-cash deal marks the biggest-ever takeover for LVMH chairman Bernard Arnault - Europe's richest person - as he challenges 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 as the takeover was discussed. 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 largest deal in the luxury industry cements a successful streak for Arnault's firm, with LVMH's stock price quadrupling during the past eight years. To fuel growth, LVMH has embraced acquisitions, spending more than US$12 billion across 19 deals since the start of 2016, according to Bloomberg Intelligence.
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.
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 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 chief executive officer Alessandro Bogliolo 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.
Tiffany's shares have traded steadily above the initial offer price since Bloomberg News first reported the talks on Oct 26, closing at US$125.51 a share on Nov 22. LVMH shares have risen 3.2 per cent during the same period.