PARIS, France – French luxury giant LVMH said on Monday, October 28, it was in preliminary talks to take over US jewelers Tiffany but there was “no certainty” that they would be successful.
A source close to the talks told Agence France-Presse at the weekend that LVMH had made a $14.5 billion bid for Tiffany at the start of October, but that the iconic US company had yet to respond to the offer.
Tiffany’s stock market value stood at $11.9 billion at the close of Wall Street trading on Friday, October 25.
“Following recent market rumors, the LVMH group confirms having started preliminary discussions about a possible operation with Tiffany,” LVMH said in its statement Monday.
The purchase of Tiffany by LVMH would be one of the largest acquisitions by the French group, which is a world leader in luxury, present in fashion to wine, perfumes and cosmetics.
LVMH’s share price was mildly higher following the announcement, rising 0.3% to 384.90 euros in mid-morning Paris stock trading.
But Tiffany’s stock was set to surge by nearly 20%, according to pre-market quotes on NASDAQ, where it is listed.
Tiffany’s Bulgari brand – bought for $5.2 billion in 2011 – competes with Cartier and Van Cleef & Arpels, both owned by Swiss group Richemont.
‘A girl’s best friend’
“They say diamonds are a girl’s best friend and Europe’s richest man, and owner of Louis Vuitton Bernard Arnault, obviously feels that adding US jeweler Tiffany to his list of brands will prompt a similar uplift to LVMH’s global revenues,” said Michael Hewson, chief market analyst at CMC Markets UK.
“His attempt to put a $14.5bn ring on Tiffany, having already added Bulgari a couple of years ago is likely to take the fight in this sector to its closest rival Richemont, who own Cartier, and would help LVMH in gaining better access to US markets,” he said.
Hewson added, however, that Tiffany shareholders were “unlikely to accept this initial bid” and could hold out for more.
But Tiffany’s profits and sales have been hit hard from the fallout in the US-China trade war and unrest in Hong Kong, he noted.
The luxury industry is jittery, not just over the trade war but also because of a broad anti-corruption campaign launched by Chinese president Xi Jinping which has put the brakes on extravagant gifts offered by businessmen and bureaucrats.
The discussions between the two companies come after LVMH owner billionaire Bernard Arnault inaugurated a Louis Vuitton factory in south Texas alongside US President Donald Trump and his daughter Ivanka.
Tiffany’s flagship New York store is next to Trump Tower on 5th Avenue. – Rappler.com
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