Tiffany’s Looks to Reclaim Its Luster In $16.2 Billion Deal With LVMH

(The Washington Post) -
(AdrianaGórak)

LVMH, the European behemoth behind dozens of luxury labels, has agreed to buy Tiffany & Co. – a move that will expand its jewelry portfolio and attempt to revitalize Tiffany’s wobbling global sales.

The $16.2 billion deal announced Monday values Tiffany at $135 a share. The jeweler has struggled with weaker-than-expected revenue, in part because of Chinese tourists who are traveling less and, in turn, damping sales at locations in New York and Hong Kong.

LVMH is among Europe’s most valuable companies at roughly $220 billion. Its 75 brands include Louis Vuitton, Bulgari and Christian Dior, for which it paid $13 billion to take full control in 2017.

Alessandro Bogliolo, chief executive of Tiffany, said in a statement that the jeweler had been focusing on driving sustainable long-term growth. The deal, “which occurs at a time of internal transformation for our legendary brand,” would help provide that support.

“We will be proud to have Tiffany sit alongside our iconic brands and look forward to ensuring that Tiffany continues to thrive for centuries to come,” said Bernard Arnault, LVMH’s chairman and chief executive, in a statement.

Milton Pedraza, chief executive of the research and consulting firm the Luxury Institute, described LVMH as “a powerhouse in luxury” bolstered by a portfolio that spans fashion, accessories, fragrances and beauty. LVMH carries the financial heft to bring a struggling Tiffany back to its feet. Despite its history as an American darling, Tiffany “would not have been able to be as great in the next five to 10 years without the boost it’s getting from LVMH,” Pedraza said, especially if there’s another recession.

“I don’t think there’s many combinations where you could say both companies win in the short and the long term, and this is one of them,” Pedraza said.

Jewelry is one of the strongest segments of the luxury industry worldwide. According to Bain & Co., luxury jewelry sales rose 7% in 2018 to roughly $20 billion. The market for personal luxury items came in at nearly $290 billion last year.

Tiffany, which has more than 300 stores worldwide and roughly $4.4 billion in annual revenue, has experimented with how to become more relevant to younger audiences that may not be as captivated by those iconic tiny blue boxes. In August, the jeweler rolled out its first comprehensive jewelry line for men, which included nearly 100 designs. But analysts were skeptical Tiffany would be able to win over the average Joe and overcome its image as a woman’s destination for glitz and glamour.

The LVMH deal is expected to close in the middle of 2020. The acquisition has been approved by the boards of directors of both companies.