LVMH confirms Tiffany takeover talks
French luxury group LVMH confirmed on Monday that it had held preliminary discussions about a possible acquisition of US jeweller Tiffany & Co.
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"There can be no assurance that these discussions will result in any agreement," it said, as the company responded to weekend press reports that it had approached Tiffany with a $14.5bn offer.
LVMH owns fashion brands such as Christian Dior, Kenzo and Givenchy, as well as champagne brands Dom Perignon and Moet & Chandon. It is owned by France’s richest man, Bernard Arnault.
Tiffany & Co. confirmed that it had received an unsolicited, non-binding proposal from LMVH of $120 per share in cash.
"While the parties are not in discussions, Tiffany’s board of directors, consistent with its fiduciary responsibilities, is carefully reviewing the proposal, with the assistance of independent financial and legal advisors, to determine the course of action it believes is in the best interests of the company and its shareholders," it said.
RBC Capital Markets said Tiffany would become a better company and stronger competitor under the ownership of LVMH.
"This is illustrated by Bvlgari’s tremendous success after being taken over in 2011 by LVMH. LVMH has a proven track record over decades enabling different luxury brands to accelerate top line growth while preserving their identity (always focused on a long-term brand strategy vision) and to improve their profitability (backed by LVMH’s operational efficiency and corporate resources).
"Under LVMH ownership, Tiffany could realise some synergies in areas like distribution, purchasing and especially digital to explore its full potential. On the digital transformation point, Tiffany could benefit from the support of LVMH’s Digital Strategy Group, which would give Tiffany greater investment firepower to build strategic digital partnerships, modernise IT/infrastructure and adapt logistic capabilities faster to explore the opportunities created by digital, especially in China."
The bank also argued that an acquisition of Tiffany makes strategic sense for LVMH because jewellery remains one of the most attractive categories in the luxury sector.
"Tiffany would be also highly complementary to LVMH’s hard luxury portfolio because Tiffany has a broader consumer base than Bvlgari (thanks to higher exposure to more affordable price points due to its exposure to silver jewellery)," it said.
RBC pointed out that Tiffany would also boost LVMH’s watches & jewellery exposure to the all-important US luxury market, making this division more balanced from a geographical mix standpoint.
The US accounts for only 9% of LVMH watches & jewellery sales, well below 25% of total LVMH group sales, it noted.
In a note written before LVMH confirmed the press reports, Jefferies said the logic of a possible acquisition is clear and should further increase LVMH’s already dominating market share in the personal luxury goods sector.
"In any case, it will flag just how much Tiffany may be ‘in play’ and likely prove beneficial to its valuation. At $14.5-15bn Tiffany is valued at more than 18x EBIT, which is not a demanding multiple.
"Also, we think that the different product profiles of Bulgari and TIF would result in minimal cannibalisation and customer overlap. Lastly, this would be negative news for Richemont, which would now potentially have to fight LVMH on its very own turf, which is never a good thing."
At 1230 GMT, LVMH shares were up 0.2% at €384.60 while Tiffany shares were up 32% in pre-market trade at $130.04.