Louis Vuitton owner LVMH has struck a $16.2bn (£12.6bn) deal to buy iconic Fifth Avenue jeweller Tiffany after first launching a bid late last month.
The $135 (£105) per share deal will see the jeweller join top name brands such as Givenchy and Christian Dior under LVMH’s umbrella.
The merger is one of the largest in retail history, and LVMH chief executive Bernard Arnault’s biggest deal of his career.
The $135 per share price is a substantial hike on LVMH’s initial offer of $120 when it made an unsolicited approach in late October.
The New York jeweller, which employs 14,000 people across 300 stores around the world, has seen its sales struggle in recent years and has found it difficult to lure in millennials.
LVMH, by contrast, has performed well by getting big influencers such as Kylie Jenner to back its brands.
The acquisition of Tiffany will boost its profile in the jewellery market, with the brand sitting alongside Bulgari and watchmaker Tag Heuer.
“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,” Arnault said in a statement.
“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. We will be proud to have Tiffany sit alongside our iconic brands and look forward to ensuring that Tiffany continues to thrive for centuries to come.”
Tiffany’s chairman of the board, Roger Farah, called the $135 per share deal a “compelling” offer, adding that the board is confident that LVMH will invest in the brand’s future.
“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 jeweller,” Tiffany CEO Alessandro Bogliolo added.
“As part of the LVMH group, Tiffany will reach new heights, capitalising on its remarkable internal expertise, unparalleled craftsmanship and strong cultural values.”
Nasdaq-listed Tiffany saw its share price rise six per cent to $133.10 while LVMH climbed two per cent to €404.25.
Citi and JP Morgan are acting as financial advisers to LVMH, with Skadden, Arps Slate, Meagher and Flom serving as legal counsel.
Goldman Sachs and Centerview Partners are financial advisers to Tiffany, with Sullivan & Cromwell providing legal counsel.
The Louis Vuitton owner expects the transaction to close in the middle of 2020.
Tiffany, which was founded by Charles Tiffany in New York in 1837, has become an iconic destination on Fifth Avenue.
Its place in popular culture was cemented in the Audrey Hepburn film Breakfast At Tiffany’s in 1961 (pictured), with its small blue boxes becoming an iconic symbol in retail.
However, more recently it has suffered a slump in sales as it struggles to attract younger customers that brands are currently vying to woo.
Michael Hewson, chief market analyst at CMC Markets, said the huge deal should help LVMH “as it seeks to take on its closest rival Richemont, who owns Cartier, and help gain it better access to US markets”.
Kate Swaine, partner at law firm Gowling WLG, said: “It is interesting to witness further consolidation across the luxury goods sector, following hot on the heels of Michael Kors’ 2018 purchase of Versace.
“At a time when the retail market is challenging, the luxury end of the sector has proved resilient to the slowdown in economic growth. This purchase demonstrates the appetite for investment and expansion even at the heights of the sector.”
Meanwhile, Anusha Couttigane, principal fashion analyst at Kantar, added that the deal means LVMH can hold its own against rival Richemont in the jewellery space.
“The acquisition… is typical of the trend towards partnerships we have seen emerging over the last few years as heritage brands fight to compete in an increasingly cluttered space,” Couttigane.
“While some may seem to be strange bedfellows to us, particularly in the light of direct rivals joining forces, it also represents a winning strategy for brands that are seeking to scale up, drive efficiencies and share learnings for new routes to market.
“Meanwhile, Tiffany will certainly benefit from the network offered by the LVMH group. As a brand that still has scope for international growth, the extent of the LVMH retail and distribution network will significantly strengthen awareness and exposure for the Tiffany brand.”
Main image credit: Breakfast At Tiffany’s trailer (Public domain)