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Luxury Giant LVMH to Buy Tiffany for $16.2 Billion Luxury Giant LVMH to Buy Tiffany for $16.2 Billion
(about 7 hours later)
HONG KONG — LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods company, said on Monday that it would buy the jeweler Tiffany & Company for $16.2 billion. HONG KONG — LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods company, said on Monday that it had reached an agreement buy the jeweler Tiffany & Company in a $16.2 billion deal, the largest ever in the luxury sector.
The agreed deal, the largest ever in the sector, would give LVMH a bigger presence in the United States. It also would cement the status of Bernard Arnault, its chairman and chief executive, as the most acquisitive deal maker in the luxury business. Th acquisition will give LVMH a bigger foothold in the United States, as well as help Tiffany in Europe and China. It will also cement the status of Bernard Arnault, the LVMH chairman and chief executive, as the most acquisitive deal maker in the luxury business.
“We are delighted to have the opportunity to welcome Tiffany, a company with an unparalleled heritage and unique position in the global jewelry world, to the LVMH family,” Mr. Arnault, the chairman and chief executive of LVMH, said in a statement. “Tiffany is an American icon and was on the list of brands for a long time we thought was a good potential match,” Mr. Arnault said in a telephone interview from Paris.
The acquisition would add a prominent American name to the LVMH stable of brands, which includes Dior, Givenchy, Fendi, Dom Pérignon and Bulgari. The deal would help propel the French luxury company beyond traditional soft luxury goods like clothing and handbags and into what is known as the hard luxury sector, which includes watches and jewelry. The acquisition would add another prominent American name to the LVMH stable of brands, which includes Dior, Givenchy, Fendi and Dom Pérignon. The deal would help propel the French luxury company into a leadership position not only in traditional soft luxury goods like clothing and handbags, but also what is known as the hard luxury sector, which includes watches and jewelry.
LVMH, which already holds dominant positions in the worlds of fashion, leather goods, wines and spirits, has gone on a spending spree in recent years. It has picked up brands like Belmond hospitality and Rimowa luggage. The deal with Tiffany marks its second major American investment this year after it created a new luxury house, Fenty, with Rihanna, the singer. Some analysts expect the announcement to kick off other deals as brands fight to compete in a world of behemoths like LVMH and Richemont.
The company had already ventured into jewelry in 2011 by buying Bulgari, which at the time was headed by Alessandro Bogliolo, now Tiffany’s chief executive. Mr. Bogliolo said in a statement that the transaction would “provide further support, resources and momentum” in its effort to “drive sustainable long-term growth.” “We expect this to be the starting gun for a further round of industry consolidation in the luxury sector over the next 12 to 18 months, with the significant polarization we continue to see between the stronger and weaker brands,” said Swetha Ramachandran, an investment manager at GAM Global Luxury Brands Fund.
Although Tiffany’s Fifth Avenue store is a New York landmark in its own right, the jeweler’s signature blue boxes can found at more than 300 stores worldwide. After a rocky period, the brand has staged a comeback under Mr. Bogliolo’s leadership by targeting younger shoppers and expanding further in China. The agreement with Tiffany, known for its signature blue boxes and the Audrey Hepburn film “Breakfast at Tiffany’s,” is the second major investment in an American brand for LVMH this year after it created a new luxury house, Fenty, with Rihanna, the musician-actor-style setter.
The deal will give both LVMH and Tiffany the firepower to grow in China, where they will look to bring more of their goods to mainland consumers in an effort to tap into their spending power. Chinese tourist spending has been hit hard by the depreciation of the renminbi, the trade war between the United States and China and protests in Hong Kong. Mr. Arnault, who has in recent years swept brands like Belmond, the luxury travel group that owns hotels such as the Cipriani in Venice and Rimowa luggage into the fold at LVMH, said he first went to Tiffany’s Fifth Avenue store when he was living in New York in the 1980s. And he has kept an even closer eye on the brand over the last 18 months as he has mulled over other acquisition opportunities.
LVMH’s share price opened 1.8 percent higher after the deal was announced. The deal will leverage LVMH’s presence and expertise in China to help Tiffany expand in the region, where they will look to bring more of their goods to mainland consumers in an effort to tap into their spending power. Chinese tourist spending has been hit hard by the depreciation of the renminbi, the trade war between the United States and China and protests in Hong Kong. Mr. Arnault said he also believed the brand had real potential to expand its reach in Europe.
Tiffany is “strong in the U.S. and Japan, but weak in Europe and not up to growth in China,” Mr. Arnault said. “There we can help a lot, find the best locations.”
Mr. Arnault said he hoped to follow the same model at Tiffany that helped bolster sales and profitability at Bulgari, which LVMH acquired in 2011.
“We will focus on building long-term desirability,” he said. “When you are an independent brand listed on the American stock exchange, your goal has to be the next quarter profit. We can free them to have a different state of mind in the company.”
LVMH’s share price opened 1.8 percent higher after the agreement was announced. The company has performed well in 2019; its stock has climbed 58 percent since the beginning of the year, and its sales jumped 11 percent in the third quarter, despite worries about a slowing global economy and protests in Hong Kong.
Shares for Tiffany have struggled to gain traction this year, but jumped in October on news of the deal talks. For the 12 months that ended Jan. 31, the jeweler reported $586.4 million in net income, a 9 percent increase from the year before.
The deal, which still requires the approval of Tiffany’s shareholders, is expected to close in the middle of next year.The deal, which still requires the approval of Tiffany’s shareholders, is expected to close in the middle of next year.
Beside Tiffany’s business and growth prospects, and the fact that, like Louis Vuitton, it is sold only through its own network of stores, Mr. Arnault said he was also attracted to one unusual aspect of Tiffany profile. “It’s the only brand I know that owns a color,” he said.