LVMH makes acquisition bid for Tiffany & Co. currently valued US$12 billion

LVMH shares have risen 49% this year, giving them capital required to make a realistic acquisition bid for Tiffany & Co valued at US$12 billion

Oct 27, 2019 | By Jonathan Ho

According to Bloomberg reports, LVMH is in talks to buy Tiffany & Co. Given the high-end jewellery sector’s relative resilience to downturns comparative to high-end watchmaking prompting even Kering Group’s Gucci to open a jewellery boutique on Place Vendome, the takeover bid by the owner of Louis Vuitton makes business sense. Insiders say the LVMH acquisition of US jeweller Tiffany & Co. would be the biggest purchase ever, potentially dwarfing the 2011 purchase of Italian Jeweller Bulgari for US$5.2 billion. Aside from Bulgari, LVMH’s biggest takeover was for couture label Christian Dior in 2017 for US$7 billion.

LVMH makes acquisition bid for Tiffany & Co. currently valued US$12 billion

The proposed acquisition comes during a time of uncertainty, Tiffany & Co. had been struggling with lower tourism spending with US sales to Chinese visitors dropping 25% amidst the looming trade war between the two titans and unfavourably strong US foreign exchange rates. That said, the 182 year old American jeweller is competitive with legacy jewellery brands in Europe and in a 2015 Hurun report, showed that it is still favoured amongst China’s ultra-wealthy.

Since his appointment in October 2017, Tiffany & Co. CEO Alessandro Bogliolo has made several high profile decisions including experimenting with higher price points in an effort to shift its luxury positioning, in addition to pledging to absorb rising costs resulting from trade tariffs.

Valued at $12 billion,Tiffany generated $4.4 billion of sales in 2018. By 3rd quarter 2019, shares of Charles Lewis Tiffany’s namesake company are up 22%. Comparatively,  LVMH shares have risen 49% this year, giving the luxury conglomerate capital to make the acquisition bid to Tiffany & Co by way of their US$215 billion market capitalisation.

Tiffany T two ring in 18k rose gold white gold with diamonds

LVMH is led by Bernard Arnault, Europe’s richest person. The group’s most recent big ticket item was the 2018 acquisition of luxury hospitality company Belmond for US$3.2 billion, emblematic of the luxury conglomerate’s push to greater diversify their holdings.

Of the four large luxury holding companies including Swatch, Kering and Richemont group, LVMH has not been as exposed to the recent political unrest in Hong Kong, beating analyst estimates with 19% gains in leather goods and fashion sectors, LVMH watch and jewellery though growing at a slower pace compared to those divisions, fared better than their specialist watchmaking counterparts in Swatch and Richemont thanks to Bulgari’s, TAG Heuer’s and Hublot’s performance. Incidentally, current Tiffany CEO Bogliolo was a former executive of Bulgari.

 


 
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