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THE DIAMOND JEWELRY MARKETS

LVMH’S PURCHASE OF TIFFANY & CO. BEING HAILED AS JEWELRY             DEAL OF THE MILLENNIUM

 


Some are calling it the jewelry deal of the millennium. That’s difficult to say, but less than 20 years in, it almost certainly will register as the jewelry deal of the 21st Century.

On November 22 it was announced that the world’s largest luxury goods company, the Paris-headquartered LVMH Moet Hennessy Louis Vuitton, had bought New York-headquartered Tiffany & Company for $135 a share in cash. The total value of the deal was  $16.7 billion, making it the largest-ever company purchase in the luxury retail sector.

The amount paid was more than LVMH had originally intended. In October, Tiffany ‘s board had rejected an all-cash offer by LVMH of $120 a share. Most analysts agreed that the figure was too low.

LVMH upped its offer to $130 a share just a week before the final sale, and as a result was allowed to review Tiffany’s books. What its accountant saw obviously satisfied them, because the company then felt comfortable adding another $5 per share to its bid. The rest as they say is history.

Still, the deal still need been approved by the boards of both companies and that could take months, almost the middle of 2020.

A FEATHER IN THE CAP FOR EUOPE’S RICHEST INDIVIDUAL

With a global portfolio of about 75 brands in the fashion, leather goods and wines and spirits sectors, the purchase of the 182-year-old Tiffany & Co. improves its positioning in the luxury jewelry and watch categories, where it already owns brands like Bulgari, Tag Heuer, Chaumet, FRED, Hublot and Zenith.

LVMH  is controlled by Bernard Arnault, the richest man in Europe. Seventy years of age, he is currently said to be worth about $104.8 billion.

“We are delighted to have the opportunity to welcome Tiffany, a company with an unparalleled heritage and unique position in the global jewelry world, to the LVMH family,” said Arnault after agreement over the share price was approved. 

“We have an immense respect and admiration for Tiffany and intend to develop this jewel with the same dedication and commitment that we have applied to each and every one of our Maisons. We will be proud to have Tiffany sit alongside our iconic brands and look forward to ensuring that Tiffany continues to thrive for centuries to come, he added.

With about 300 retail outlets, in 2018, Tiffany’s sales equaled $4.4 billion.

LVMH, and no Tiffany, is controlled by Bernard Arnault, the richest man in Europe. Seventy years of age, he is currently said to be worth about $104.8 billion

A RELATIVELY SMALL BUT EXTREMELY VALUABLE PORTFOLIO 

Tiffany, which is one of the world’s most renown diamond houses, offers LVMH 300 new stores around the stores around the globe, which in absolute terms is not impressive, especially when compared to firms like Signet and Chow Tai Fook, which count the number of outlets in the thousands.

In 2018, Tiffany’s sales equaled $4.4 billion, which was 7 percent more than the figure reported a year earlier. Signet, by way of contrast, reported sales of $3.7 billion. Tiffany’s net earnings in 2018 totaled $586 million, compared with $370 million in 2017.

Tiffany’s current CEO is Alessandro Bogliolo, who took over the top position in 2017 and was charged with making the legendary brand more appealing to younger shoppers. He has focused on building sales in China, where the company currently has some 45 stores, 10 of them Hong Kong alone. 

“This transaction, which occurs at a time of internal transformation for our legendary brand, will provide further support, resources and momentum for those priorities as we evolve towards becoming The Next Generation Luxury Jeweler,” said Bogliolo. “As part of the LVMH group, Tiffany will reach new heights, capitalizing on its remarkable internal expertise, unparalleled craftsmanship and strong cultural values.”

The Italian Bogliolo knows LVMH well. He was CEO of Bulgari when the French giant bought that firm for a mere $5.2 million in 2011.