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Champagne at Tiffany’s!

04 December 2019

Apologies for the terrible pun, “Breakfast at Tiffany’s” didn’t sound appropriate for the soon-to-be owner. It has been announced last week that LVMH has agreed a deal to acquire Tiffany & Co. at a valuation of $16.6bn. And just before the Christmas rush of “acquisitions” of perfectly wrapped turquoise boxes!

As a Corporate lawyer with a personal and professional eye on the luxury industry, it is a deal that is sparks interest. It is a big move for a luxury conglomerate with its roots firmly in Europe and this is why we see it as an indicative move in the industry.

And before you get too excited, it is worth flagging that the deal isn’t stated to complete until summer 2020 (watch this space!)

So, why are we so interested?

  • All expectations are that there is to be a decrease in retail M&A in 2020, but it is anticipated that the luxury sector will buck the trend. This is unlikely a sign of larger M&A activity to come (there are very few targets that would consider a sale, possibly none, of such scale in the luxury sector), but it’s a sign that the market is active going into 2020, and we predict a number of smaller scale deals to come.
  • Jewellery was a $20 billion global market in 2018 and the consultancy firm, Bain & Co, has estimated that sales are set to grow 7 percent in 2019.
  • The acquisition will put LVMH at the top of the rankings for market share in branded jewellery. Until now Richemont, owner of Cartier and Van Cleef & Arpels, has taken that title.
  • Richemont also has a solid grip on the US market, and the acquisition of Tiffany & Co. is a clear move by LVMH to increase their US market share.
  • Growth in the US and Asia will be key for all luxury retailers, with increasing pressure to increase margins in those regions, and LVMH has signalled this with the acquisition of Tiffany & Co. The brand is well known in China, and American brands generally do well in Asia, but they have struggled in recent times due to increased tariffs. LVMH has confirmed that Asia will be a growth area for Tiffany & Co. under their ownership.

For those interested in the corporate details

  • The headline price of $16.6bn takes into account net debt (the equity valuation is $16.2bn). This was increased from an initial offer made in October, which valued Tiffany & Co. at $14.9bn.
  • The boards of both LVMH and Tiffany & Co. have recommended the transaction, which comprises an offer of $135 per share in cash.
  • The current estimate for completion of the transaction is summer 2020. LVMH therefore won’t be able to begin implementation of its plans for Tiffany & Co. until at least Q3 2020.
  • There are a number of conditions to be met prior to completion, including shareholder approval and regulatory requirements.
  • If the transaction is completed, Tiffany & Co. will no longer be a public company and will be delisted from the NYSE.

You can read the official joint announcement here.

And if you are very interested in the corporate details, the Agreement and Plan of Merger dated 24 November 2019 can be accessed (for free) on the US SEC’s website.

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