LVMH to buy Tiffany in $16.2bn deal

Luxury goods company LVMH, which owns brands such a Christian Dior and Givenchy, has agreed to buy US jeweller Tiffany in a $16.2bn deal.

Under the terms of the transaction, Tiffany shareholders will receive $135 per share in cash for each of their shares.

LVMH, which is owned by France’s richest man, Bernard Arnault, said the acquisition will strengthen the company’s position in jewellery and further increase its presence in the US.

Chairman and chief executive Arnault said: "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.

"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."

The acquisition, which has been approved by the boards of directors of both companies, is expected to complete in the middle of next year.

Tiffany chief executive Alessandro Bogliolo said: "Tiffany has been focused on executing on our key strategic priorities to drive sustainable long-term growth. 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."

At 1100 GMT, LVMH shares were up 2.3% at €405.35 and Tiffany shares were up 6% in pre-market trade at $133.

RBC Capital Markets said: "Acquiring Tiffany makes sense for LVMH because of the scarcity of acquisition targets with global scale and brand appeal in jewellery, the least crowded category in the luxury sector with one of the highest barriers to entry (there are only a handful of global luxury jewellery brands).

"Tiffany could be highly complementary to LVMH’s hard luxury portfolio because Tiffany has a broader consumer base than Bvlgari thanks to its higher exposure to more affordable price points given its well-established silver jewellery offer. Tiffany (44% of sales from Americas) would also boost LVMH’s watches & jewellery exposure to the all-important US luxury market and make this division more balanced from a geographical mix standpoint: the US accounts for only 9% of LVMH watches & jewellery sales versus 25% of total LVMH group sales."

Olivetree Financial said: "An agreed deal at $135 per share appears to be a win for both TIF and LVMH. Buying TIF greatly bolsters LVMH’s hard luxury segment and helps to diversify its customer base by increasing its US and Chinese exposure. Additionally, at this valuation, the deal appears to be 5% accretive to LVMH without significantly impacting their balance sheet.

"Tiffany management have now also delivered a win to their shareholders in the midst of a turnaround effort and garnered a valuation of 4.2x 2019 EV/revenues versus the peer group average of 3.9x."