The all-cash deal is expected to close in the middle of 2020. LVMH shares rose as much as 2 per cent in morning trading in Paris, approaching a record.
Tiffany’s shares rose 6 per cent in pre-market trading in New York. They’ve traded steadily above the initial offer price since Bloomberg News first reported the talks late last month.
The deal cements a successful streak for Arnault’s firm, which is worth about €200 billion after its stock price quadrupled during the past eight years. To fuel growth, Europe’s richest person has embraced acquisitions, spending more than $US12 billion across 19 deals since the start of 2016, according to Bloomberg Intelligence.
Yet even with that spree, LVMH has lagged behind Richemont in luxury jewellery, a significant area of growth in emerging markets such as China. LVMH’s last major deal in that area was in 2011, when it acquired the Bulgari brand.
LVMH raised its bid for Tiffany at least twice before coming to an accord, bolstering its offer to $US130 from $US120 just days ago, according to people with knowledge of the situation. While the company dwarfs Tiffany with sales of about $US50 billion, some analysts had predicted LVMH might need to pay even more, with price targets of $US140 at Credit Suisse and $US160 at Cowen.
The revised price tag may reflect the changing fortunes of Tiffany, where Chief Executive Officer Alessandro Bogliolo has cut back on entry-priced gifting options and revamped its marketing to target younger shoppers after a difficult period when the firm lost track of consumer trends.
Offerings from the 182-year-old brand include $US165 heart-shaped earrings, as well as top-end options like a $165,000 diamond chain. The company gets about 44 per cent of its revenue from the Americas and 43 per cent from Asia. The rest comes mostly from Europe.
Citigroup and JPMorgan Chase gave LVMH financial advice, while Tiffany hired Goldman Sachs Group Inc. LVMH’s legal counsel was Skadden, Arps, Slate, Meagher & Flom, while Tiffany’s was Sullivan & Cromwell.