Jewel in the crown: LVMH to buy Tiffany for $16.2bn

LVMH has increased its bid for Tiffany to $135 per share

LVMH has increased its bid for Tiffany to $135 per share Credit STEPHANE DE SAKUTIN AP

While LVMH's stable of brands includes Christian Dior fashion and Dom Perignon Champagne, the company hasn't been as prominent in jewelry as in fashion or cosmetics.

With the acquisition of Tiffany, LVMH is in a stronger position to challenge Richemont, the owner of Cartier, for dominance in the global jewellery business.

Rumors of a potential deal began rumbling last month, prompting Tiffany to confirm it had received an unsolicited bid for $120 per share, valuing the company at $14.5 billion.

The iconic NY jeweler Tiffany has been suffering falling sales, hit by lower spending by tourists and a strong United States dollar.

The sale of the brand means change for the iconic retailer who operates a retail store at Providence Place Mall and more importantly employs hundreds at a manufacturing facility in Cumberland, RI. Known for its pale blue boxes tied with a white ribbon, the firm unveiled its first diamond ring in 1886 and was later made famous by Truman Capote's 1958 novella Breakfast at Tiffany's, which was turned into a film in 1961 starring Audrey Hepburn.

The transaction is approved by the boards of both companies and is expected to close in the middle of 2020 after approvals of Tiffany's shareholders and regulatory bodies.

Yet even with that spree, LVMH has lagged behind Richemont in luxury jewelry, a significant area of growth in emerging markets such as China. They were trading around $90 per share at the beginning of October, before LVMH first began to make overtures to Tiffany's management.

Not all are profitable to the same degree - the group is still trying to revive its Marc Jacobs label - but Arnault cited the firm's 2011 acquisition of Bulgari as a model for Tiffany.

It also lets LVMH tap into a different type of luxury demand, from clients who view their purchase as more of an investment than an impulse buy.

The acquisition of Tiffany will boost LVMH's position in the jewelry market and strengthen its presence in the USA, the French company said.

LVMH has 75 brands, 156,000 employees and a network of more than 4,590 stores.

"LVMH can leverage off these to launch a more concerted "attack" on the Asian millennial market".

Growth in jewellery outpaced that of other businesses such as fashion in 2018, according to consultancy Bain & Co, which forecast comparable sales in the $20bn global jewellery market were set to grow 7 percent this year.

Citi and JPMorgan advised LVMH, while Centerview Partners and Goldman Sachs worked with Tiffany.

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