Would LVMH-ownership be a good change for Tiffany?
Tiffany confirmed Monday that it is reviewing an all-cash proposal for $120 per share from LVMH, the French luxury goods giant.
Shares of Tiffany catapulted $31.17, or 31.6 percent, by Monday’s close to $129.72. Tiffany is expected to push for a higher price, and rivals Kering and Richemont are expected to consider making offers. LVMH’s $14.5 billion offer represented a nearly 22 percent premium to Tiffany’s closing price on Friday.
For LVMH, Tiffany would help diversify its offerings that are dominated by fashion and also help them compete in the jewelry space against Richemont, the owner of Cartier and Van Cleef & Arpels. As of January, LVMH’s jewelry and watch unit — including Bulgari, Chaumet Hublot and Tag Heuer — only brought in nine percent of the company’s revenue. Tiffany is the second largest jeweler after Cartier.
Best known for its engagement rings, Tiffany would also offer a jewelry brand with somewhat more accessible price points compared to Bulgari or Cartier.
LVMH’s jewelry brands could presumably land on Tiffany’s selling floors and the jeweler could collaborate with many of LVMH’s 75 different brands. LVMH’s fashion businesses include Louis Vuitton, Christian Dior, Marc Jacobs, Fendi, Givenchy and Le Bon Marché. Other brands include Dom Pérignon, Moët and Hennessy in the spirits category; Sephora, Fresh and Benefit in beauty; and Rimowa luggage.
The move by LVMH would also boost its presence in the U.S, its second largest market after Asia, representing a quarter of revenues.
Tiffany’s current CEO, Alessandro Bogliolo, has emphasized a strategy of building sales in China and LVMH could guide the expansion.
Any acquirer would assume the challenge of reviving the 182-year-old luxury jeweler’s sales, which have been stagnant to declining in recent years. Tiffany’s U.S sales have been hurt by a slump in U.S. tourism due to the stronger dollar and a slowdown in China’s economy.
Tiffany’s is involved in more complicated revival efforts as well, such as reframing its image to make the brand hipper to Millennials who are looking for more experiences and a less formal version of luxury. The retailer has so far done an extensive revamp of its 57th street flagship, adding an Instagram-friendly cafe, its first men’s collection and an ad campaign featuring Lady Gaga.
- Tiffany Confirms Receipt of Unsolicited, Non-Binding Proposal from LVMH – Tiffany
- Tiffany Shares Surge on LVMH Takeover Bid – The New York Times
- Louis Vuitton Owner Bid $14.5 Billion for Tiffany – Bloomberg
- Louis Vuitton owner offers to buy jewelry icon Tiffany & Co – CNN
DISCUSSION QUESTIONS: Would an acquisition by LVMH or another luxury conglomerate be a positive or negative development for Tiffany? Would an acquisition by a non-luxury player be more ideal?