Louis Vuitton Explores Potential Takeover of Tiffany in U.S. Luxury Push

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(Bloomberg) –LVMH, the French owner of Louis Vuitton, is exploring a takeover of Tiffany & Co. to expand in the U.S. jewelry market, according to people familiar with the matter.
The luxury group is holding talks with Tiffany, though there’s no guarantee an agreement will be reached, said the people, who asked not to be identified because discussions are private. Tiffany’s shares have gained 22% this year, valuing it at $12 billion. LVMH has risen 49%, giving it a market capitalization of about $215 billion.

Representatives for Tiffany and LVMH declined to comment.

An acquisition of Tiffany would be the biggest ever by LVMH, higher than the $7 billion it paid for the rest of Christian Dior in 2017, and potentially among the largest deals by a European company this year. It would be Chairman Bernard Arnault’s first major transaction since the purchase of luxury hotel chain Belmond last year.

A deal would further diversify the conglomerate, which has been riding a wave of luxury demand in China but faces risks including that country’s trade war with the U.S. and the anti-Beijing protests in Hong Kong — now in their sixth month. The company nonetheless beat analysts’ estimates with a 19% sales gain for its key fashion and leather business in the most recent quarter.

Trump and Texas

With brands ranging from cosmetics retailer Sephora and Hublot watches to Hennessy cognac to Dom Perignon champagne, LVMH is looking to sharpen its focus further on the U.S., the company’s second-largest region by revenue behind Asia. Earlier this month, it opened a new Louis Vuitton factory in Texas in a ceremony that included President Donald Trump and his daughter Ivanka.

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In jewelry, however, the company isn’t as dominant. The company owns Bulgari, but Swiss rival Richemont SA has Cartier as well as Van Cleef & Arpels. Adding Tiffany would broaden LVMH’s scope. While Bulgari makes a watch costing almost 2 million euros ($2.2 million), Tiffany is better known for engagement rings that might cost a couple months’ pay.

LVMH’s nine-month figures show growth in the watches and jewelry division is slower than all the company’s other units, with fashion and leather goods leading the way.

Losing Sparkle

Global names dominate categories like high-end watches and handbags, but consumers haven’t historically thought about the brands behind their diamond pendants and gold hoops. A study by consultancy McKinsey found that brands made up only 20% of the jewelry market in 2014 — a figure it expects to double by 2020.

Tiffany has been bouncing back under Chief Executive Officer Alessandro Bogliolo, revamping its New York flagship store with major investments targeting younger shoppers.

Arnault is already Europe’s richest man. A deal would probably help keep him ahead of luxury rivals, including Richemont’s Johann Rupert and Gucci owner Kering’s Pinault family.

If an agreement is reached, it would mark the latest push by a French company to tap growth in the U.S. French technology company Dassault Systemes SE agreed in June to buy Medidata Solutions Inc., a software firm that analyzes clinical trials, for $5.7 billion. And last year, Axa SA acquired XL Group Ltd. for $15.3 billion, seeking to capture a bigger slice of the U.S. property and casualty market.

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