Tiffany to be sold in $16.2bn LVMH deal

February 2020 | DEALRFONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

February 2020 Issue

The world’s biggest luxury group, LVMH, has agreed to acquire US jeweller Tiffany & Co in a deal worth $16.2bn.

The deal will see Tiffany shareholders receive $135 per share held in cash, a premium of more than 50 percent above where the share price stood before news of LVMH’s interest emerged.

LVMH first approached Tiffany in late October 2019 with an unsolicited $14.5bn bid which was rejected as too low. The higher offer has been approved by the boards of both companies but is still subject to the approval of Tiffany’s shareholders. The deal is expected to be completed by the middle of next year.

The deal, which will be financed by bond issues, will add around €500m to €600m to LVMH’s operating profits in the first 12 months after completion. For the 12 months that ended 31 January 2019, the jeweller reported $586.4m in net income, a 58 percent increase from the year before.

“We are delighted to have the opportunity to welcome Tiffany, a company with an unparalleled heritage and unique position in the global jewellery world, to the LVMH family,” said Bernard Arnault, chairman and chief executive of LVMH. “We have an immense respect and admiration for Tiffany and intend to develop this jewel with the same dedication and commitment that we have applied to each and every one of our Maisons. We will be proud to have Tiffany sit alongside our iconic brands and look forward to ensuring that Tiffany continues to thrive for centuries to come.”

“Following a strategic review that included a thoughtful internal process and expert external advice, the Board has concluded that this transaction with LVMH provides an exciting path forward with a group that appreciates and will invest in Tiffany’s unique assets and strong human capital, while delivering a compelling price with value certainty to our shareholders,” said Roger N. Farah, chairman of Tiffany.

“Tiffany has been focused on executing on our key strategic priorities to drive sustainable long-term growth,” said Alessandro Bogliolo, chief executive of Tiffany. “This transaction, which occurs at a time of internal transformation for our legendary brand, will provide further support, resources and momentum for those priorities as we evolve towards becoming The Next Generation Luxury Jeweller. As part of the LVMH group, Tiffany will reach new heights, capitalising on its remarkable internal expertise, unparalleled craftsmanship and strong cultural values.”

The deal for Tiffany is the latest in a succession of notable deals for LVMH, which has built up a large portfolio of luxury brands across different retail sectors, including Moët & Chandon, Dom Perignon, Givenchy and Louis Vuitton. LVMH is the world’s largest luxury group, owning 75 different prestige brands.

The Tiffany deal eclipses the previous largest deal completed by LVMH’s chief executive, Bernard Arnault, which saw the company pay $13bn for Dior in 2017.

Tiffany has over 300 stores globally and about $4.4bn in annual revenue. Nearly half of its sales come from Asia. LVMH’s acquisition of the company is a bet on China’s economy and consumers where Tiffany is planning to open several flagship stores in the coming years. The company is hoping that it will be able to tap into the domestic spending power of Chinese mainland consumers as Chinese tourist spending has suffered in light of the weakening of the renminbi, the ongoing trade war with the US and the uncertainty and protests which have gripped Hong Kong over the last 12 months.

The acquisition of Tiffany will strengthen LVMH’s position in the jewellery space and further increase its presence in the US. Currently, sales in LVMH’s jewellery and watch division make up only 9 percent of the company’s total revenue.

Richard Summerfield