MILAN — As Bulgari’s share price plummets further, speculation is rising that the family jeweler is becoming a takeover target.Bulgari’s shares have shed more than 55 percent of their value in 12 months, giving the company a market capitalization of just $1.14 billion — a free fall so severe it helped push the company out of Italy’s MIB30 blue chip index. (Dollar figures have been converted from the euro at current exchange rates.) On Tuesday, Bulgari shares closed on the Milan Bourse at $3.76, down 4 cents, or about 1 percent. The high for the year, reached March 25, is $10.03, and the low, hit Sept. 10, is $2.82.At those prices, Bulgari is a bargain. Some in the market speculate that major players like LVMH Moët Hennessy Louis Vuitton or Gucci Group would drool over such a deal. There is also talk that Bulgari chief executive officer Francesco Trapani could lead a management buyout to delist Bulgari’s shares from the market.Bulgari denied that management is planning such a buyout but the company declined to comment on speculation about a takeover."It is inevitable that when a stock falls people start to wonder what is going to happen," said Melanie Flouquet, an analyst with J.P. Morgan in London. Flouquet said she has fielded several inquiries from her investor clients regarding a potential Bulgari takeover. But she downplayed the possibility as "pure speculation." One thing is certain: Bulgari is under pressure. Sales of watches have been particularly weak, pushing first-half net profit down 53.2 percent to $22 million. Sales in the half contracted 5.7 percent to $332.2 million.Last month, Bulgari trimmed its full-year targets and warned there won’t be a significant recovery until next year."The market has lost faith in management recently," one analyst said. Investors are increasingly frustrated with Bulgari’s strained margins and they are beginning to question some of the company’s recent strategic moves — namely plans to open a chain of luxury hotels through a joint venture with Marriott International Inc., he said."Trapani may start to lose a bit of momentum," agreed one investment banker, who speculated that trouble at the helm could pave the way for a management shakeup or a shift of control.Gucci declined to comment on interest in Bulgari and LVMH did not return calls seeking a comment, but neither of those companies is seen making large acquisitions in the near term.Gucci is busy with its own large stable of brands like Yves Saint Laurent, Bottega Veneta, Stella McCartney and Alexander McQueen. Meanwhile, Gucci may lose control of its purse strings because Pinault-Printemps-Redoute could be eyeing Gucci’s $2.24 billion cash pile for its own use. PPR might become Gucci’s sole shareholder in 2004, when the French company must launch an offer to buy out all the Gucci shares it doesn’t already own.The situation looks similar at LVMH. Last month, chairman Bernard Arnault said the company plans to focus on organic growth and build its "star brands," such as Louis Vuitton, Dior and Fendi.Also lurking in the wings could be Compagnie Financière Richemont. In March, sources said the Swiss jewelry giant made overtures to the Bulgari family. Richemont declined to comment, but sources close to the company said an acquisition would be unlikely, since Richemont is focusing on expanding in the U.S., where Bulgari doesn’t have a strong presence.But as more and more luxury goods groups shy away from acquisitions to focus attention in-house, private equity groups and entrepreneurs could emerge as new buyers in the industry.Texas Pacific Group expanded into luxury goods when it bought Bally in 1999. In a similar attempt to revive a flagging brand, Lawrence Stroll and Silas Chou, formerly executives at Ralph Lauren and Tommy Hilfiger, bought U.K.-based jeweler Asprey & Garrard in 2000.Still some market watchers say a management buyout could be a more likely scenario."The family can buy the company quite cheaply," one analyst noted. If the Bulgari family were to purchase the 43.46 percent it doesn’t already own of Bulgari, it would cost about $494.72 million, based on current market prices.

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