French luxury giant LVMH said on Monday it was in preliminary talks to take over US jewellers Tiffany but there was “no certainty” that they would be successful. A source close to the talks told AFP at the weekend that LVMH had made a US$14.5 billion bid for Tiffany at the start of October, but that the iconic US company had yet to respond to the offer.
Tiffany’s stock market value stood at US$11.9 billion at the close of Wall Street trading on Friday. “Following recent market rumours, the LVMH group confirms having started preliminary discussions about a possible operation with Tiffany,” LVMH said in its statement Monday.
The purchase of Tiffany by LVMH would be one of the largest acquisitions by the French group, which is a world leader in luxury, present in fashion to wine, perfumes and cosmetics.
A girl’s best friend.
Tiffany’s Bulgari brand – bought for US$5.2 billion in 2011 – competes with Cartier and Van Cleef & Arpels, both owned by Swiss group Richemont. “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 jeweller 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.
“His attempt to put a US$14.5bn ring on Tiffany, having already added Bulgari a couple of years ago is likely to take the fight in this sector to its closest rival Richemont, who owns Cartier, and would help LVMH in gaining better access to US markets,” he said. Hewson added, however, that Tiffany shareholders were “unlikely to accept this initial bid” and could hold out for more.
However, Tiffany’s profits and sales have been hit hard from the fallout in the US-China trade war and unrest in Hong Kong, he said. The luxury industry is jittery, not just over the trade war but also because of a broad anti-corruption campaign launched by Chinese president Xi Jinping which has but the brakes on extravagant gifts offered by businessmen and bureaucrats.
The discussions between the two companies come after LVMH owner billionaire Bernard Arnault inaugurated a Louis Vuitton factory in south Texas alongside US President Donald Trump and his daughter Ivanka. LVMH shares were firmer in early Paris stock exchange trading, up 0.5% at €385.90 by 0900 GMT.