French conglomerate LVMH buys Tiffany in deal worth $16 Billion, in bid to re-shine its own jewellery division.
Luxury conglomerate LVMH Moët Hennessy Louis Vuitton SE has reached a $16.2 billion deal to buy American jewellery giant Tiffany & Co.
The companies announced that they had entered an agreement for LVMH to acquire Tiffany for $135 a share.
“We strongly believe that LVMH is not only an ideal owner for Tiffany but also that this iconic brand is a perfect addition to our portfolio and perfect complement to our existing model,” LVMH Chief Financial Officer Jean-Jacques Guiony.
The all-cash acquisition is one of the largest ever for the French conglomerate known for its hard-charging deal making and surpasses its $13 billion deal for Christian Dior in 2017.
The storied American brand has resisted acquisition for years, but as one of the few independent global jewellery houses remaining in the market, analysts had long speculated that it would make an attractive, if expensive, target.
But Tiffany has had a difficult time lately. In the first half of 2019, worldwide net sales at Tiffany decreased 3 percent to $2.1 billion. The American jeweller is facing weak demand at home and abroad, and will likely need heavy investment to re-energise its brand and business.
The deal will bring LVMH’s substantial financial and market clout to help support Tiffany’s ongoing transformation efforts. At the same time, it boosts the French company’s presence in the US market.
The deal also allows LVMH to gain further ground on Swiss conglomerate Richemont, which has long dominated hard luxury with its ownership of Cartier and Van Cleef & Arpels. Jewellery was one of the best-performing luxury categories in 2018, according to Bain & Co, which predicts that the global $20 billion market will grow 7 percent this year.
Tiffany employs more than 5,000 artisans to cut diamonds and craft its jewellery, rather than buying from middlemen.
Representative from Macy's said last week that there are plans in place to close 125 of its stores over the next couple of years and cut minimum 2,000 corporate jobs as a cost-savings effort.
The company said it would close stores in lower-tier malls, and explore new avenues, as it looks to tackle plummeting mall traffic.
The chain, which has been struggling to boost store traffic as consumers opt for online shopping in the United States, has closed more than 100 stores since 2015 and cut thousands of jobs.
"We will focus our resources on the healthy parts of our business, directly address the unhealthy parts of the business and explore new revenue streams," Chief Executive Jeff Gennette said.
The to-be-closed 125 stores currently account for about $1.4 billion in annual sales, the company said.
It also said it expects annual gross cost savings of $1.5 billion by 2022, with $600 million expected in 2020.
It forecast full-year net sales to be between $23.6 billion and $23.9 billion, below analysts' average estimate of $24.36 billion, according to IBES data from Refinitiv.
The first campaign video got launched on 7th Jan during the Golden Globes. We love the tag line " Everyone deserves a comeback " which is a direct play at Winona's career and the L'Oreal Paris's Elvive line of products.
France's LVMH is helping projects by upcoming entrepreneurs in the luxury goods space, including a start-up whose software might help detect counterfeits. The owners of Louis Vuitton, aim to support the new businesses by hosting them in a mega-campus where they can collaborate with its in-house brands.
LVMH, the world's biggest luxury goods group, is following in the footsteps of French cosmetics giant L'Oréal in grabbing a corner of Station F, a vast startup incubator in Paris where it offers rent-free space to the startups.
"The idea is to animate and activate those conversations around the things that might affect the luxury industry," said Ian Rogers, who is a former Apple executive who joined LVMH in 2015 as chief digital officer.
Paris is among one of the major European cities bidding to displace London's dominance in the startup scene as BREXIT looms and President Emmanuel Macron pushes a pro-reform agenda to promote business and investment.
Station F was launched last year by French billionaire Xavier Niel, who is also the partner of Delphine Arnault, an executive at Vuitton and daughter of LVMH boss Bernard Arnault.
In mid December, TSG Consumer Partners (“TSG”), a leading private equity firm focused exclusively on the branded consumer sector, and Huda Beauty, one of the world's fastest-growing beauty brands, announced that TSG has acquired a stake in Huda Beauty. Ofcourse, the financial terms of the transaction were not disclosed. TSG see Huda Beauty's industry leading digital reach, their amazing global influence and ofcourse best-in-class product offerings as a grounds for joining forces and help lead the brand into the future.