Louis Vuitton owner offers $14.5b for jeweller Tiffany

Bloomberg

LVMH has offered $14.5 billion for jeweller Tiffany & Co in a bid that could result in Chairman Bernard Arnault’s biggest ever takeover and expand the Louis Vuitton owner’s reach into the US.
Tiffany said it received an unsolicited $120-a-share proposal from the luxury giant, after the French company confirmed a Bloomberg report that it was considering a bid.
The jeweller advised shareholders to take no action, saying its board is reviewing the offer.
There’s no assurance that preliminary talks will result in an agreement, LVMH said in a statement, while Tiffany said no discussions are under way.
A deal for the jeweller would expand the French company’s access to US luxury shoppers, giving it an iconic, 182-year-old brand known for its robin’s egg blue boxes and its role as a favorite haunt of Holly Golightly in Truman Capote’s “Breakfast at Tiffany’s.” Adding the brand to a stable that includes the Bulgari jewel and watch label, Christian Dior fashions and Hublot watches could help LVMH compete against Cartier owner Richemont SA.
Jewellery is one of few segments of the luxury sector where LVMH is not the leader, “and we know Mr Arnault likes to be always No. 1,” RBC analyst Rogerio Fujimori said in a note. “Tiffany would become a better company and stronger competitor under the ownership of LVMH.”
A fair valuation of the jeweller would be about $160 a share or higher, according to Cowen & Co analyst Oliver Chen. He wrote in a note that Tiffany’s “strategic positioning as a gifting authority, brand DNA as a diamond and bridal authority, are leading qualities and deserve an exceptional premium.”
Paris-based LVMH was little changed in early afternoon trading. It has jumped about 50% this year, giving it a market capitalisation of about $215 billion.
The French company has been riding a wave of luxury demand in China but faces risks including that country’s trade war with the US and the months-long anti-Beijing protests in Hong Kong.
Earlier this month, it opened a new Louis Vuitton factory in Texas in a ceremony that included President Donald Trump as the French company sharpens its focus on the US, its second-largest region by revenue behind Asia.
LVMH’s Tiffany bid makes sense, but the $14.5 billion rumored price may be too little, as the 14x Ebitda valuation compares with 20x-plus for LVMH’s Bulgari and Swatch’s Harry Winston deals. Tiffany would boost LVMH to luxury jewellery No. 1 ahead of Richemont and infill its Bulgari, Chaumet and Fred brands, said Deborah Aitken, BI luxury retail analyst.
A takeover of Tiffany would be bigger than the $7 billion LVMH paid for the rest of Christian Dior in 2017. For 70-year-old Arnault, it would be his first major transaction since the purchase of luxury hotel chain Belmond last year, and potentially among the largest deals by a European company in 2019.
After a difficult period when it lost track of consumer trends and suffered from a slump in US tourism, Tiffany has been bouncing back under Chief Executive Officer Alessandro Bogliolo, revamping its New York flagship store with major investments targeting younger shoppers.
Bogliolo, a former executive of Bulgari and jeans label Diesel who was hired by the US jeweller two years ago after hedge fund Jana Partners pushed for changes, has refreshed Tiffany’s marketing.