French luxury giant LVMH said Monday it was exploring a takeover of US jewelers Tiffany, most famous for its fine diamonds and luxury silver wedding and engagement rings.
Such a deal, proposed by LVMH at $14.5 billion, would be among the largest ever for the owner of Louis Vuitton, Dior and Moet & Chandon, giving the company a much bigger presence in the United States, analysts said.
Tiffany, founded in 1837 and headquartered on glamorous 5th Avenue in New York next to the Trump Tower, 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 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 there were no actual discussions going on but that it was “carefully reviewing” the proposal.
Focus on price
Talks between the two companies are “dead for now,” said a person familiar with the matter, speaking on the condition of anonymity. However, negotiations could be revived in the coming weeks.
The two sides differ on price, with Tiffany seeking a bigger premium — something LVMH Chief Bernard Arnault has resisted.
LVMH is not presently considering going public with a hostile bid for Tiffany, said the source, adding that LVMH is planning to sit tight for now.
Tiffany said LVMH’s offer was for $120 per share, which values the company at around $14.5 billion, about a 22 percent premium over its closing price on Friday.
On Monday, shares of Tiffany surged more than 30 percent, suggesting investors expected a bid from another luxury brand, or a higher offer from LVMH.
“But it’s hard to think of someone else who could write a check for more than $15 billion,” said another person familiar with the talks.
‘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.
Still, Hewson added, Tiffany shareholders were “unlikely to accept this initial bid” and could hold out for more.
Tiffany’s profits and sales have been pressured from the fallout in the US-China trade war, fewer tourists and the strong dollar.
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.
LVMH’s Bulgari brand — bought for $5.2 billion in 2011 — competes with Cartier and Van Cleef & Arpels, both owned by Swiss group Richemont, which holds Cartier and Van Cleef & Arpels.
“The deal is important for LVMH to become a bigger player in the US market, which is the biggest luxury market in the world,” said analysts at Invest Securities.
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.
Founded by Charles Lewis Tiffany, the jeweler opened its first store in southern Manhattan. The company began trading on the stock market in 1987.