Shares in Tiffany jumped by almost 30 per cent after the US jeweller confirmed it was reviewing a $14.5bn allcash takeover bid from LVMH, the world’s largest luxury goods group.
Tiffany, the brand known for its duck-egg blue boxes and diamond engagement rings, said on Monday that LVMH has made an unsolicited offer of $120 a share, valuing the shares at $14.5bn and the company at $14.9bn, including net debt.
It said its board of directors was “carefully reviewing the proposal” but added that it was “not in discussions with LVMH”.
Tiffany shares jumped 29.9 per cent to $127.99 in early trading on Monday, their highest level in 14 months, as investors bet on a higher bid.
The offer price marks a 22 per cent premium to where Tiffany’s stock price closed at on Friday, and a more than 30 per cent premium to where its shares were trading when LVMH made the offer earlier this month, according to a personal familiar with the situation.
A takeover of Tiffany by LVMH, the owner of Louis Vuitton, Dior and Moët Hennessy, would mark the largest-ever deal by its chairman and chief executive Bernard Arnault, who has led the consolidation of the luxury goods industry over the past four decades.
It would expand the group’s footprint in the US, its secondlargest market by sales after Asia, at a time of increased trade tensions between the US and China. A deal would also push LVMH further into hard luxury following its $5.2bn acquisition of Italian jeweller Bulgari in 2011, for which it had to pay a 60 per cent premium. It also owns smaller watch brands TAG Heuer and Hublot.
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LVMH confirmed in a statement earlier on Monday that it has held “preliminary discussions” regarding a possible transaction with Tiffany, adding that “there can be no assurance that these discussions will result in any agreement”.
People familiar with the situation said the US jeweller was likely to rebuff LVMH’S unsolicited $14.5bn takeover approach because Tiffany believes the offer undervalues the company. Oliver Chen, an analyst at Cowen, said a fairer valuation of the jeweller would be about $160 a share or higher.
An acquisition of Tiffany, whose flagship store on Manhattan’s Fifth Avenue was immortalised by Audrey Hepburn in the 1961 film Breakfast at Tiffany’s, would give LVMH increased firepower in the jewellery sector to rival that of Johann Rupert’s Richemont, which owns Cartier and Van Cleef. It would further increase its scale vis-à-vis its smaller French rival Kering and allow the group to tap into consumers who cannot afford its high-end Bulgari brand.
Jewellery was one of the fastgrowing categories in the personal luxury goods sector last year, according to Bain consultants. Last year the overall market for personal goods grew 6 per cent to reach a record high of €260bn. The shoes and jewellery categories both outperformed in 2018, each gaining 7 per cent.
Tiffany generated net sales of $4.4bn last year and is in the middle of a revamp under chief executive officer Alessandro Bogliolo. Mr Bogliolo, a former Bulgari executive, is seeking to target younger shoppers and reposition the brand to be more upmarket. It had suffered from lower tourist spending in the US and a strong dollar.
“Tiffany would become a better company and stronger competitor under the ownership of LVMH,” wrote Rogerio Fujimori, an analyst at RBC Capital Markets, in a note on Monday, pointing to Bulgari’s “tremendous success” after being taken over by LVMH.
