LVMH’s $16.6bn Acquisition of Tiffany & Co.

By Niclas Hallberg, Harvey George, Jonathan Fuchs, Chiara Fulvi (London School of Economics), Ilya Korzinkin, Mihir Gupta, Hugo Tay and Siddarth Sharma (UCL) – Date: 14/12/2019


Overview of the Deal

  • Acquirer: LVMH (EPA: MC)

  • Target: Tiffany and Co. (NYSE: TIF)

  • Estimated Value: $16.6bn  ($135 per share)

  • Approved on: 25 Nov. 2019

  • Acquirer Advisors: Citigroup, J.P. Morgan

  • Target Advisors: Centerview Partners, Goldman Sachs

  • Anticipated close: Mid 2020

In the largest ever luxury sector acquisition, LVMH will add yet another brand to its existing portfolio of 75, thereby defending its status as the world's biggest luxury conglomerate. In late November LVMH convinced Tiffany’s board to accept an offer of $135 per share ($16.6bn) - a substantial revision of its initial offer of $120 per share ($14.9bn).

The acquisition of the american luxury jeweller is anticipated to increase LVMH’s market share in the branded jewellery sector to 18.4%, eclipsing Richemont’s historically dominant market share of 14.8%. Richemont, the Swiss owner of Cartier, Van Cleef & Arpels and a plethora of other luxury watch brands, will be LVMH’s biggest competitor in the hard-luxury sector.

Tiffany & Co. has been struggling to produce revenues in recent years, and has recently missed earnings by wide margins. Thus, Tiffany’s board and Bernard Arnault, Europe’s richest man and chairman and CEO of LVMH, believe the jeweller would benefit from not having to report its financials publicly - something Tiffany would not have to do once subsumed by LVMH. Furthermore, as recent history has shown, consolidation is the key to success as the capital and economies of scale a conglomerate can provide prove invaluable to individual brands.

Company details (Target - Tiffany)

Tiffany & Co. was founded in 1837 in New York City, and currently has over 300 outlets worldwide. The brand specialises in diamonds and jewellery, and has a product offering that spans a wide price range. Before the acquisition, Tiffany has always been an independent company, and its shareholders include Vanguard, and Qatar Investment Authority. Ever since Audrey Hepburn starred in the movie ‘Breakfast at Tiffany’s”, Tiffany’s iconic blue ribbon brand has been globally recognised and admired, making it a valuable asset for the company. Tiffany has struggled to keep up with the changes in recent fashion, and the spending habits of Chinese consumers, who make up 30% of the demand for luxury goods worldwide. As a result, Tiffany has been hit by lower spending by consumers in Asia as well as by tourists in the US. Because of this, Tiffany’s revenue has greatly slowed recently, however its brand prestige still remains high, making it one of the most valuable assets to the company.

- Founded in 1837, headquartered in New York

- CEO: Alessandro Bogliolo

- Number of employees: 14,200

- Market Cap: $14.72bn - EV: $16.96bn

- LTM Revenue: $ 4.38bn - LTM EBITDA: $ 971.4m

- LTM EV/Revenue: 4.03x - LTM EV/EBITDA: 18.18x

Company details (Acquirer - LVMH)

LVMH is a Paris-based luxury conglomerate, with holdings that span the whole luxury industry, including wine, fashion, leather, perfume, cosmetics, and watches. It is the biggest public company in France, and has shown strong growth in recent years, with its share value appreciating by an extraordinary 60% over the past year alone. LVMH’s business model is inherently built on acquisitions, which so far have proven incredibly successful, and have made the conglomerate industry leader in all sectors of luxury.

- Founded in 1987, headquartered in Paris, France

- Chairman and CEO: Bernard Arnault

- Number of employees: 156,000