On 25 November 2019 LVMH agreed to buy the US jeweller Tiffany for $135 a share, about $16,200 million. It is the group’s biggest acquisition and strengthens its bet on jewellery.
On Monday 25 November 2019, LVMH Moët Hennessy Louis Vuitton and Tiffany & Co. announced a definitive agreement under which the French group will buy the US jeweller for $135 a share, in cash. Tiffany’s equity is valued at around $16,200 million, about €14,700 million. The boards of both companies have approved the deal and Tiffany’s board recommends that its shareholders back it. It is therefore an agreed deal between the two parties and not a hostile bid.
How the deal came about
The agreement comes after a few weeks of negotiation. In mid-October LVMH made a first offer of $120 a share. The following week it raised it to about $130, which led Tiffany to open its books to the group, and in the end the price was set at $135. According to the news agency AFP, Tiffany closed the previous Friday at $125.51 and was trading at about $90 at the start of October; the offer is therefore about 7.6% above the last close.
Until completion, the deal is subject to approval by Tiffany’s shareholders and by the regulatory authorities, and completion is expected in mid-2020. It is the largest acquisition in LVMH’s history; the group has 75 houses, including Louis Vuitton, Dior and Moët & Chandon.
What LVMH is after
Tiffany was founded in 1837, when Charles Lewis Tiffany opened a store in downtown Manhattan. Today it is headquartered on Fifth Avenue in New York and has more than 300 stores worldwide. It is the leading luxury brand of US origin and is best known for engagement rings and diamonds.
For LVMH, the purchase can be read in several ways. The first is to strengthen its position in jewellery and watches, where it already owns Bulgari, Chaumet, TAG Heuer and Hublot, and to compete head-on with Richemont, owner of Cartier. The second is to increase its presence in the US market. And the third, according to the information published, is that Tiffany has grown less than its rivals in recent years, so the group sees room to develop it.
Bernard Arnault, chairman and chief executive of LVMH, said the group is committed to developing Tiffany with the same dedication it applies to its other houses. Alessandro Bogliolo, Tiffany’s chief executive, said the agreement supports the company’s strategy to become a next-generation luxury jeweller.
What the deal shows
For family businesses and brand owners, the case shows how large acquisitions of listed companies are usually put together: an initial offer, a price improvement that opens negotiations and a definitive agreement that remains conditional on shareholders and regulators. It also shows that the big luxury groups buy brands with an identity of their own and bring them in as houses with their own profile within their portfolio. For anyone thinking of selling a business, the case is a reminder that the price of a sale is negotiated on what the buyer believes it can do with the brand, and not only on its recent results.
The agreed price corresponds to a specific offer, and the deal still has to clear the planned votes and approvals. Anyone with a professional interest in the sector can follow that timetable through to mid-2020.
A $16,200 million purchase is decided in two steps: first the price, and then the approvals.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
