New York (AFP)
French luxury giant LVMH confirmed Monday it made an offer - estimated at $ 14.5 billion - to Tiffany, one of the big names in jewelery, to further expand its presence in the United States, but the negotiations are currently at a standstill.
The acquisition of the New York jeweler, who served as the backdrop for the first scene of the movie "Breakfast at Tiffany's" with Audrey Hepburn in 1961, would be one of the most important for the group and would come add a name surrounded by prestige and history to that of Louis Vuitton, Dior or the Veuve Clicquot and Moët & Chandon champagnes.
"Following recent market rumors, the LVMH Group confirms that it has begun preliminary discussions on a possible operation with Tiffany," said LVMH in a statement, while stating that at this stage there is no had "no certainty" that these discussions resulted in an agreement.
"Tiffany is looking carefully at the proposal," said the jeweler, whose flagship adjoins the Trump Tower on 5th Avenue in New York.
- Outbidding? -
Negotiations between the two groups are for the moment "stalled", told AFP a source close to the file. It is not excluded however that they resume their language in the coming weeks.
The two parties differ on the price. The luxury giant offers $ 120 per share, which represents a 22% premium for shareholders compared to the closing price of the title on Friday night on Wall Street. But Tiffany wants LVMH, chaired by billionaire Bernard Arnault, to raise its offer.
What is not willing to do for the moment the French group that would see, in case of merger, its growth boosted in the United States, its second market after Asia. At the same time, the group would limit the negative effects of trade tensions that weigh on the demand for luxury goods in China.
On Monday, Tiffany shares soared 31.63% to 129.72 dollars, investors seem to bet on a counter-offer of another luxury group or on the bidding of LVMH, present in various sectors. activity, ranging from fashion to wines and spirits through fragrances, cosmetics and selective distribution (Sephora).
"It's hard to believe that anyone else will sign a check for more than $ 15 billion," said another source.
- What will Tiffany do? -
However, it is "unlikely that Tiffany shareholders will accept this initial proposal," of $ 14.5 billion, "since it represents only a modest premium over its current valuation," said Michael Hewson, analyst for CMC Markets.
Both sides are conducting analyzes of Tiffany's past performance compared to other luxury groups, whose profits and margins have soared since 2014 under the impetus of the Asian clientele and in this case Chinese with the consequent purchasing power.
The jeweler's gross operating margin has increased 3.6% in the last five years, while its sales rose 6.5% to $ 4.4 billion in fiscal 2018. Nevertheless, its growth is hampered by the strong dollar and a drop in tourist spending in the United States.
On the stock market, Tiffany's share price has appreciated only 6% between early 2014 and Friday night, while LVMH's share has more than tripled.
This transaction could allow LVMH to "complete a portfolio of unique brands", by strengthening its presence in jewelery, commented Invest Securities analysts. LVMH already owns the Bulgari brand but is still far from its rival Richemont, owner of Cartier and Van Cleef & Arpels.
"This is to say the importance that the LVMH Group continues to attribute to the US market which remains intrinsically the first global outlet for luxury," added analysts.
Bernard Arnault, accompanied by President Donald Trump and his daughter Ivanka, inaugurated, in mid-October, a Louis Vuitton plant in South Texas.
Founded in 1837 by Charles Lewis Tiffany, the New York jeweler had opened his first boutique in southern Manhattan. It was listed on the stock market in May 1987, almost 150 years after its creation.
© 2019 AFP