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Tiffany Ties The Knot With LVMH For $16.2 Billion

Tiffany Ties The Knot With LVMH For $16.2 Billion

On Sunday, the board of Tiffany & Co. (NYSE: TIF) approved the deal and bid by LVMH (OTC: LVMHF) at $135 a share in cash, amounting to $16.2 billion. This match made in luxury heaven- hard-luxury that is, was first reported by The Financial Times. The transaction will be wrapped up by the middle of 2020 following approval from Tiffany's shareholders and regulatory bodies.

For LVMH – Expand US Reach And Strengthen Position In Hard-Jewelry

The deal will transform LVMH's Watches & Jewelry division and complement LVMH's 75 distinguished brand houses. LVMH has built an impressively large portfolio of luxury brands across the globe and across different retail sectors – you name it, LVMH most likely has it. Its portfolio is served by 156,000 employees with its presence distributed over 4,590 stores. Its well-known brands include Louis Vuitton, also Audrey Hepburn related Givenchy, Moët & Chandon, Dom Perignon, and many others.

With Tiffany's "unparalleled iconic heritage", LVMH is getting a bigger slice of one of the fastest growing upmarket, not to say luxury, sectors. Shares of the French multinational luxury goods conglomerate went up 1.4% after the announcement on Monday morning.

For Tiffany's

It is safe to say Tiffany & Co. became an iconic jewelry brand in the 20th century since it was founded in New York in 1837. But the legendary brand has struggled with quite a few headwinds over the last several years which hampered its growth. Failing annual sales took down its profit since 2015, before a turnaround in 2017 when Tiffany's dazzled with its first 2018 quarter, smashing estimates and sending its stock to an all-time high. They pushed into China and even added cheaper products to compete with Danish Pandora (CPH:PNDORA) "contagion".

But not only Pandora had a disappointing net loss and undergoing a turnover program. Tiffany's branding has weakened over the years due to millennials which are a generation known as ‘ditching diamonds'. Along with younger generations, the iconic brand celebrated by Audrey's Hepburn having breakfast in front of its Fifth Avenue window, the brand is also challenged by lower spending by tourists and a strong US dollar. And there's the pros and cons of being "timeless". The strong association is an asset – everyone knows the shiny Tiffany's. But the time factor is also a weakness in itself as millennials don't want to shop where their parents and even grandparents did.

The shares of an iconic New York-based jeweler have risen over hopes of a higher priced deal. Shares closed on Friday at $125.51, they traded at about $140 in the middle of last year.

Tiffany's brand has weakened over the last few years and LVMH has great expertise in helping brands recover and continue growing. The conglomerate already showed off its parenting skills with Bulgari, expanding its operating margins from 8% to 25%.

Match Made In Luxury Heaven

This is surely the largest-luxury deal to date that will enter history. Tiffany's chairman looks forward to an exciting path forward with a group that appreciates its capital and is willing to invest and further build up Tiffany's priceless assets. With the expertise and experience of revitalizing businesses, the luxury emperor is able to turn old-fashioned brands into cutting-edge trends and Tiffany's will surely gain valuable guidance when it comes to appealing to younger generations. On the other hand, let's hope there won't be any conflicts regarding the ‘luxury' attribute.

This is, after all, the main attribute of LMVH but Tiffany's CEO is not a fan of this word, calling Tiffany a ‘legendary' brand instead. Luckily, this word is banned from Louis Vuitton as management wanted its staff to focus on ‘creativity, creating long term value and making a legacy'. LMVH's enthusiasm towards Tiffany's priceless and "legendary" blue box is guaranteed to last long post the engagement! To conclude, this particular couple seems to have all the conditions to get along and dazzle together!

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Image by Charles Davis from Pixabay


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