LVMH buys Tiffany's diamonds for 14.7 billion euros

With the acquisition of the New York jeweler, the French group strengthens its position in high-end jewelry, the only luxury sector where it is not number one. SPENCER PLATT / AFP

Tiffany has yielded to the advances of Bernard Arnault. The New York jeweler's board of directors recommends the latest offer from the French luxury group, " at a price of 135 dollars per share ", Announced the two groups by statement Monday, November 25, shortly before the opening of the Paris Stock Exchange. At the end of this final agreement LVMH pledged to take back 350 million dollars (317 million euros) of debts that the American was carrying. The operation values ​​Tiffany at around 14.7 billion euros "Specify the two groups.

Tiffany should definitely fall into the fold of the French group in mid-2020, after approval of the transaction by shareholders who must meet in general meeting in the first quarter.

Read to understand the context: LVMH wants to buy Tiffany's diamonds for 13 billion euros

The group of Bernard Arnault whose sales reached 46.7 billion euros in 2018 has launched the assault on Tiffany this summer according to banking sources. In mid-October, Antonio Belloni, Mr. Arnault's man of confidence, went to Manhattan to deliver a first offer to Tiffany & Co's general manager, Alessandro Bogliolo. The two Italian leaders know each other well. The jeweler's boss is a former LVMH; he directed Bulgari's operations between 1996 and 2012, as well as those of Sephora, another subsidiary of the French group, in the United States.

The French group hopes to compete better with Richemont, market leader, thanks to Cartier and Van Cleef & Arpels

The managing director of LVMH proposes to buy the US luxury brand for $ 14.5 billion in cash, or 13 billion euros. Although representing a premium of 30% over the last share price of Tiffany & Co on Wall Street, this first offer at $ 120 per share is freshly received. The board of directors is slow in responding. And the whole project is revealed by the agency Bloomberg, Saturday, October 26. The following Monday, upon the opening of the US stock markets, the title Tiffany & Co flames on Wall Street.

So much so that, for three weeks, the action flirted with the initial price proposed by the French luxury giant. After new negotiations and bidding, the two parties finally reached an agreement Sunday, November 24. The group of Bernard Arnault has agreed to add 1.7 billion euros to afford this American gem.

LVMH signs the largest acquisition since its creation in 1987 and the largest buyout in the sector. In contrast to the recovery of American Belmont hotel group of 46 institutions, for $ 3.2 billion in April, Mr. Arnault does not sign a diversification.

LVMH is already a heavyweight in the jewelery market. He made 4.1 billion euros in sales in 2018, thanks to his Chaumet rings, his Fred sets and, above all, thanks to the collections of Bulgari, Italian brand bought in 2011. So what good is it to take over the American Tiffany too? ? The French group hopes to better compete with the Swiss Richemont, undisputed leader of this market thanks to his claws Cartier and Van Cleef & Arpels. He prefers, however, to evoke potential Of the American brand and its hold on the overseas market.

Recovery Strategy

Tiffany makes 44% of its sales in the Americas, but the brand has a network of 300 stores worldwide. Therefore, in the eyes of the world leader in luxury, Tiffany would be an asset to accelerate the pace in this market whose engine is fueled by the enrichment of Asian customers and their appetite for statutory brands. Annual growth in sales of solitaires, pendants and other bracelets is estimated at 7% by Bain & Co.

Mr. Arnault promises to " make shine This iconic brand including the New York store located in Manhattan on the Ve Avenue was the scene of the movie Diamonds on sofa, by Blake Edwards in 1961, with Audrey Hepburn. In fact, all facets of the Tiffany diamond deserve serious polishing. Because, despite a recovery strategy led by Mr. Bogliolo, its sales – $ 4.4 billion in 2018 – progress weakly. And its stores have a yield per square meter well below industry standards and those LVMH, provides a spokesperson.

Read the analysis: "In France, luxury giants crush the stock market with their power"

The French group intends to apply to Tiffany the recovery method it has implemented at Bulgari successfully. As soon as it was bought in 2011 for 3.7 billion euros, LVMH has allocated colossal means to revive it: new boutiques with the best addresses, advertising campaigns and new creations. The world leader in luxury has even launched palaces in his name. It has become the example to follow: in seven years, its activity would have more than doubled, reaching a turnover of nearly 2.5 billion euros in 2018. Tiffany must follow the same fate. The stock market is already wondering about the return on investment that the French group could hope for this purchase. At the opening of the markets in Paris on Monday, the LVMH share gained 1.7%.


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