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Louis Vuitton’s parent company LVMH has sent a bid to acquire popular luxury jewelry brand, Tiffany. Anonymous reports say Tiffany has hired a few advisers to help make a decision and would likely turn it down.
LVMH, the French multinational luxury goods company and owner of the Louis Vuitton and Givenchy brands, has made an official offer to acquire Tiffany & Co., the popular American luxury jewelry retailer. LVMH hopes to expand its business, by taking a direct dive into the United States markets for luxury fashion items and has chosen to do this through Tifanny.
According to a Bloomberg report, LVMH is offering $14.5 billion for the acquisition which was noted by certain people who are privy to the proposed arrangement but wish to remain anonymous. The bid was calculated at $120 per share price for Tiffany and supposedly, Tiffany is currently appraising the deal and has hired experts to peruse the offer down to its very basics.
However, there is really no pointer to whether or not the two companies will agree. However, reports on the American side of the negotiations have it that Tiffany would most likely be turning LVMH down on the grounds that the offer undervalues the jewelry maker. In an LVMH Group statement, the company said:
“In light of recent market rumours, LVMH Group confirms it has held preliminary discussions regarding a possible transaction with Tiffany. There can be no assurance that these discussions will result in any agreement.”
For more than a few years, LVMH has pretty much been on top of its game with several different brands all performing quite impressively independently. Some of these brands include Christian Dior, Marc Jacobs International, TAG Heuer, Bvlgari, Belvedere, as well as the Veuve Cliquot Champagne and Moet Hennessy.
Tiffany, however, hasn’t performed so great and has even recorded significant double-digit losses especially in its Chinese-focused sales, due to the less than favorable conditions that have stemmed from all the tariffs and other aspects of the trade tensions in the war between China and the U.S. It, however, surpassed expectations quite impressively in its quarterly earnings reported in August. This is reportedly due to a serious decision to reduce its marketing expenditure.
At the moment, LVMH’s largest acquisition was the purchase of Christian Dior back in 2017. The deal was worth $7 billion and gave LVMH full control. However, if the Tiffany deal works out, then it will easily dwarf the Christian Dior deal as the company’s largest acquisition. Since the news came to light, Tiffany’s shares have spiked over 20% in premarket trading.
According to Oliver Chen, an analyst with American financial services company Cowen & Co, a fairer price for Tiffany would be a valuation calculated at $160 at least. Chen says this is because of Tiffany’s “strategic positioning as a gifting authority, brand DNA as a diamond and bridal authority, are leading qualities and deserve an exceptional premium.”
Another analyst at RBC Capital Markets believes that Tiffany would be great operating from out of LVMH. The analyst Rogerio Fujimori said, “Tiffany would become a better company and stronger competitor under the ownership of LVMH.”