LVMH to buy luxury hotel group Belmond

French luxury group LVMH Moët Hennessy Louis Vuitton has agreed to buy Belmond, the owner of the Hotel Cipriani in Venice, in a $2.6bn deal.

LVMH will pay $25.00 a share in cash for Belmond, which owns, part-owns and manages 46 luxury hotel, restaurant, train and river cruise properties. In the twelve months ended 30 September 2018, Belmond recorded total revenues of $572m and adjusted earnings before interest, tax, depreciation and amortisation of $140m.

The deal is expected to complete in the first half of next year subject to the approval of Belmond’s shareholders and clearance by the relevant competition authorities.

LVMH said the acquisition will significantly increase its presence in the ultimate luxury hotel world. "

Synonymous with history, heritage and timeless experiences, Belmond has a seasoned management team and is an ideal complement to the Cheval Blanc maisons, renowned for their exceptional service, architecture and unique gastronomy," it said.

Roland Hernandez, chairman of the board of directors of Belmond, said: "Following a strategic review that attracted broad and deep interest from a wide range of real estate and lodging companies, sovereign wealth institutions and other financial buyers around the world, the board has concluded that this transaction with LVMH provides compelling and certain value for our shareholders as well as an exciting path forward with a group that appreciates Belmond’s irreplaceable assets and strong management team.”

LVMH chairman and chief executive Bernard Arnault said: “Belmond delivers unique experiences to discerning travelers and owns a number of exceptional assets in the most desirable destinations. Its heritage, its innovative services, its excellence in execution and its entrepreneurship resonates well with the values of the group and is complementary to our own Cheval Blanc maisons and the Bvlgari hotels activities. This acquisition will significantly increase LVMH’s presence in the ultimate hospitality world."

RBC Capital Markets said that while the deal multiples may look optically high, we should remember that Belmond owns a unique portfolio of trophy real estate assets.

"Belmond’s iconic properties include Hotel Cipriani in Venice, HotelSplendido in Portofino and the Copacabana Palace in Rio, just to name a few. Its train journey experiences include the Venice Simplon Orient-Express and its distinctive cruises include the Belmond Aflot in France fleet," it said.

Berenberg said that while some investors may question the acquisition, which appears to lie outside LVMH group’s core operations, it is consistent with its long-term strategy focused on offering the consumer a full spectrum of luxury experience.

"Importantly, the deal does not affect group’s significant balance sheet firepower, which we estimate now at circa €25bn (assuming c2.0x net debt/EBITDA) and expect to be deployed in the next 12-18 months, as we foresee an uptick in M&A activity in the sector."