FRANCE – LVMH, a French multinational luxury goods conglomerate and owner of the Louis Vuitton brand has agreed to buy Tiffany for $16.2 billion in its biggest acquisition yet.
The $135-per share cash deal will boost LVMH’s smallest business, the jewellery and watch division that is already home to Bulgari and Tag Heuer, help it expand in one of the fastest-growing industry sections and grow its U.S. presence.
Growth in jewellery outpaced that of other luxury businesses such as fashion in 2018, according to consultancy Bain & Co, which forecast comparable sales in the US$20 billion global jewellery market were set to grow 7% this year.
LVMH plan to restore Tiffany’s luster will have challenges to overcome too, as spending patterns shift and Chinese shoppers retreat from the United States to buy more at home, one of the side effects of a Beijing-Washington trade war.
Competition from lower-priced rivals such as Denmark’s Pandora A/S and Signet Jewelers has also muddied the waters for Tiffany in recent years.
But the New York-based brand, founded in 1837 and known for its signature robin’s egg blue boxes, still has a resonance as the go-to purveyor of engagement rings only a handful of rivals can match, such as Richemont-owned Cartier.
“It’s an American icon, which is now going to become a little French too,” LVMH’s Chairman and Chief Executive Arnault told Reuters in an interview.
LVMH finance chief Jean-Jacques Guiony told analysts that taking Tiffany off the stock market and investing in its products would help the company deliver its revival plan.
“We expect to bring Tiffany time and capital, which are two things that are not too easy to get when you report quarterly to the stock market,” he said, adding LVMH would build on popular new Tiffany lines such as its more modern “T” jewellery ranges and saw potential for the brand in accessories like scarves.
The purchase crowns a string of acquisitions through which Arnault, France’s richest man, has built up his conglomerate, including fashion brands like Christian Dior, wineries, and beauty retailers like Sephora.
Not all are profitable to the same degree – the group is still trying to revive its Marc Jacobs label – but Arnault cited the firm’s 2011 acquisition of Bulgari as a model for Tiffany.
The group invested in store revamps, new product ranges and communication at the Italian jeweller, and lifted operating profits fivefold.