Following the constant round of musical chairs in fashion, as well as coming fresh off the heels of the announcement of this luxury acquisition, we figure out why Tiffany & Co. stands to benefit from this move.
In a statement released on their website on November 25, LVMH Moët Hennessy–Louis Vuitton SE announced their acquisition of luxury jewelry brand, Tiffany & Co, in a $16.2 billion agreement.
Housing many luxury brands such as Louis Vuitton, Givenchy, Bulgari, and Hennessy; the addition of Tiffany & Co. to LVMH’s brand roster will strengthen their stand in the jewelry industry as well as increasing the luxury group’s presence in the United States where Tiffany is currently the leading luxury brand to originate from the country, the statement provides. This means that LVMH will have a wider access to the luxury U.S. market along with its other American brands: Marc Jacobs, Benefit Cosmetics, and Kat Von D Beauty.
The deal has been a long journey for both parties with LVMH’s initial bid of $120 per share back in October was deemed too low to push forward. The final agreed acquisition value of $135 per share which amounts to almost $2 billion more that the initial bidding.
The deal comes at a time where Tiffany, though an iconic 137 year-old New York brand, has struggled in recent years. It had experience declining annual sales and profit since 2015, with a revenue turnaround in 2017. The luxury jewelry brand has also done a recent expansion in China but has experienced sales decline in its home country and Asia. Chief Executive Officer of Tiffany, Alessandro Bogliolo shares on the acquisition’s timing, “Tiffany has been focused on executing on our key strategic priorities to drive sustainable long-term growth. 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.”
The effect of the acquisition was immediate from its announcement. On Monday morning, LVMH’s shares were up 2% while Tiffany shares increased 6% in premarket trading.
Chairman and Chief Executive Officer of LVMH and Europe’s richest person, Bernard Arnault, shares in their official statement, “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. 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.”
The acquisition transaction is expected to close in mid-2020.
Photo from Tiffany & Co.