LVMH mulls takeover of Tiffany & Co in US luxury push

The jeweller's shares have gained 22% this year, valuing it at $12 billion

FILE PHOTO: The logo of U.S. jeweller Tiffany & Co. is seen at a store at the Bahnhofstrasse shopping street in Zurich, Switzerland October 26, 2016.   REUTERS/Arnd Wiegmann/File Photo
Powered by automated translation

LVMH, the French owner of Louis Vuitton, is exploring a takeover of Tiffany & Co to expand in the US jewellery market.

The luxury group is holding talks with Tiffany, though there is no guarantee an agreement will be reached, said a source. Tiffany’s shares have gained 22 per cent this year, valuing it at $12 billion (Dh44.07bn). LVMH has risen 49 per cent, giving it a market capitalisation of about $215bn.

Representatives for Tiffany and LVMH declined to comment.

An acquisition of Tiffany would be the biggest ever by LVMH, higher than the $7bn it paid for the rest of Christian Dior in 2017, and potentially among the largest deals by a European company this year. It would be Chairman Bernard Arnault’s first major transaction since the purchase of luxury hotel chain Belmond last year.

A deal would further diversify the conglomerate, which has been riding a wave of luxury demand in China but faces risks including that country’s trade war with the US and the anti-Beijing protests in Hong Kong – now in their sixth month. The company nonetheless beat analysts’ estimates with a 19 per cent sales gain for its key fashion and leather business in the most recent quarter.

With brands ranging from cosmetics retailer Sephora to Hublot watches, LVMH is looking to sharpen its focus further on the US, the company’s second-largest region by revenue behind Asia. Earlier this month, it opened a new Louis Vuitton factory in Texas in a ceremony that included President Donald Trump and his daughter Ivanka.

In jewellery, however, the company is not as dominant. The company owns Bulgari, but Swiss rival Richemont has Cartier as well as Van Cleef & Arpels. Adding Tiffany would broaden LVMH’s scope. While Bulgari makes a watch costing almost €2 million (Dh8.13m), Tiffany is better known for engagement rings that might cost a couple months’ pay.

LVMH’s nine-month figures show growth in the watches and jewellery division is slower than all the company’s other units, with fashion and leather goods leading the way.

Global names dominate categories like high-end watches and handbags, but consumers haven’t historically thought about the brands behind their diamond pendants and gold hoops. A study by consultancy McKinsey found that brands made up only 20 per cent of the jewellery market in 2014 — a figure it expects to double by 2020.

Tiffany has been bouncing back under chief executive Alessandro Bogliolo, revamping its New York flagship store with major investments targeting younger shoppers.

Mr Arnault is already Europe’s richest man. A deal would probably help keep him ahead of luxury rivals, including Richemont’s Johann Rupert and Gucci owner Kering’s Pinault family.

If an agreement is reached, it would mark the latest push by a French company to tap growth in the US French technology company Dassault Systemes agreed in June to buy Medidata Solutions, a software firm that analyses clinical trials, for $5.7bn. And last year, Axa acquired XL Group for $15.3bn, seeking to capture a bigger slice of the US property and casualty market.