French luxury giant LVMH said Monday it was exploring a takeover of US jewellers Tiffany, most famous for its fine diamonds and luxury silver wedding and engagement rings.
Tiffany, founded in 1837 and headquartered on glamorous 5th Avenue in New York, is the most iconic of US luxury brands, an image reflected in the “Breakfast at Tiffany’s” novella by Truman Capote, made into a film with Audrey Hepburn in 1961.
LVMH, one of the world’s most powerful luxury conglomerates, said it was in “preliminary talks” to take over Tiffany but there was “no certainty” that they would be successful.
Tiffany, in a separate statement Monday, confirmed “an unsolicited, non-binding proposal” from the French conglomerate, saying it was for $120 per share, which values the company at around $14.5 billion.
Tiffany’s stock market value stood at $11.9 billion at the close of Wall Street trading on Friday.
The US company said there were no actual discussions going on but it was “carefully reviewing” the proposal.
LVMH said earlier Monday that “following recent market rumours, the LVMH group confirms having started preliminary discussions about a possible operation with Tiffany”.
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, with brands including Louis Vuitton, Dior and champagnes Veuve Clicquot et Moet & Chandon.
LVMH’s share price was mildly higher following the announcement, rising 0.3 percent to 384.90 euros in mid-afternoon Paris stock trading.
But Tiffany’s stock surged by more than 29 percent in early Wall Street trading to $127.33. This seemed to indicate that traders not only expected the bid to go ahead but that LVMH would sweeten its offer.
“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 jeweller 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 $14.5 billion 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.
LVMH’s Bulgari brand – bought for $5.2 billion in 2011 – competes with Cartier and Van Cleef & Arpels, both owned by Swiss group Richemont.
Hewson added, however, that Tiffany shareholders were “unlikely to accept this initial bid” and could hold out for more.
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.
In a sign of these tougher times, Tiffany’s share price had been down nearly eight percent from its year-earlier level on Friday, before news of the LVMH move.
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 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.
