LVMH and Ralph Lauren: A Potential Merger on the Horizon
If a deal were to be brokered, this M&A would be one of the largest in the apparel industry.
French luxury conglomerate LVMH is rumoured to buyout American fashion brand Ralph Lauren.
According to news site Axio, LVMH conducted discussions regarding the possible acquisition of Ralph Laurent over the past two years and if the deal proceeds, it is touted to be one of the largest in the industry. Just last year, in January, LVMH bought over Tiffany & Co., for US$15.8 billion.
Ralph Laurent himself founded the US brand in 1967, and through the years, it has become one of the top luxury fashion companies in the country. Currently, Laurent holds the position of Chief Creative Officer and Executive Chairman. At age 82, he is now considering a succession plan option.
Being the parent company of major fashion brands like Louis Vuitton, Christian Dior, Celine and Fendi, LVMH can lead Ralph Laurent. The adding of Tiffany and its smooth transition boosted the confidence of the French luxury giant. Since the takeover and under the leadership of Alexandre Arnault, the American jeweller had undergone a significant rebrand designed to attract younger shoppers.
Financially, the New York-based company was hit hard by the pandemic, but its recent sales results have seen improvement as the world slowly reopens. The demand for clothes grew with the return of socialisation. Ralph Laurent has been expanding its reach to the younger audience as well. Ralph Lauren launched new digital services such as the holiday-themed digital clothing collection on the Metaverse to appeal to digital natives.
An article by Forbes mentioned that Ralph Laurent “sells for a multiple of EBITDA of less than 9x while LVMH sells for just under 16x”. Including Ralph Laurent’s earnings to LVMH will only increase the latter’s stock prices, which means the acquisition will be an accretive deal.
Should a deal come into fruition, it would further cement LVMH’s position within the US market. It has already started to make inroads into this crucial market through Tiffany, and adding Ralph Laurent will allow LVMH to take point into two critical categories: Jewellery and Fashion. This will propel the group’s position further up compared to its competitors like Kering and Richemont.
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