LVMH Moet Hennessy Louis Vuitton SA (OTCMKTS:LVMUY) has increased the bid price to $162 billion from $14.5 billion to take over Tiffany & Co. (NYSE:TIF), an iconic American dealer. This translates to a share price of $135. Apart from cash, the deal also includes a debt of $350 million. It is the most significant deal in the luxury sector.
Chief Executive Officer and Chairman of LVMH, Bernard Arnault, said the company intends to develop Tiffany with the same commitment and dedication as it applies to every Maison. It is pleased to sit along with Tiffany and ensure that an iconic brand will thrive for the years going forward.
Tiffany expects to see a turnaround
Analysts wonder why LVMH chooses Tiffany, which is no longer the top tier company since it already acquired Bulgari in 2011 for $5.2 billion. Thanks to the considerable efforts put in by Alessandro Bogliolo, its new Chief Executive Officer, Tiffany expects to see a turnaround. Before joining Tiffany in 2017, Alessandro played a vital role for 16 years at Bulgari.
LVMH establishes a strong presence
LVMH expects to establish a strong presence in the jewelry market with the takeover of Tiffany. It will compete with Richemont Group of Switzerland in the rapidly growing luxury market. The takeover of Tiffany also allows LVMH to improve its footprint in the US.
LVMH is strong in high-end categories such as champagne and clothing. Aaron Kirchfield, an expert at Bloomberg, said the takeover Tiffany helps LVMH to address the weak spot. Apart from gaining immediate access to the US market, LVMH also gets exposure to the Chinese market. Kirchfield further said LVMH expects to equate Bulgari with Tiffany. LVMH also has expertise in improving the margins by adopting cost-cutting measures. According to Kirchfield, Tiffany lures affluent customers with high-end Louis Vuitton purse studded with sparkling diamonds.
Tiffany shareholders are at an advantage
The deal with LVMH is good news for Tiffany because its shareholders get an elevated price of $135 for each share. It is an increase of $15 from $120 offered earlier. Arnault has been searching for potential targets for the past two years to improve its business. LVMH will use its track record to elevate the business of Tiffany.