By Fleur Burlet
with contributions from Samantha Conti
 on October 27, 2019
A woman walks past a Tiffany & Co. store at a shopping mall in Beijing. The designer boutiques of Manhattan and Paris are feeling the chill of a Chinese economic slowdown that has hammered automakers and other industries. That is jolting brands such as Louis Vuitton and Burberry that increasingly rely on Chinese customers who spend $90 billion a year on jewelry, clothes and other high-end goods. The industry already is facing pressure to keep up as China's big spenders shift to buying more at the spreading networks of luxury outlets in their own countryLuxury Shopping Chill, Beijing, China - 29 Nov 2018

PARIS — LVMH Moët Hennessy Louis Vuitton seems to have its appetite back for acquisitions — and big ones.

Reports over the weekend suggested the French luxury group has held takeover talks with the premier American luxury brand, Tiffany & Co., a potential move at least one luxury analyst applauded.

Separately, sources told WWD that LVMH also took a serious look at Prada earlier this year, but discussions stopped over the summer and no deal was concluded.

Citing anonymous sources, both Bloomberg and French news wire AFP reported Saturday that LVMH approached Tiffany with a takeover proposal of $120 a share earlier this month, and that the American jewelry brand is evaluating the bid. There is no guarantee an agreement will be reached, Bloomberg cautioned. The Financial Times reported Sunday that Tiffany is expected to reject the offer.

Both LVMH and Tiffany spokespeople had no comment on the reports.

Acquiring the American luxury jewelry company would strengthen LVMH’s positioning in the jewelry segment. The French group owns Bulgari, which it bought in 2011 for $5.2 billion, along with Chaumet, Fred and the watch brands Tag Heuer, Hublot and Zenith. Francesco Trapani, former chief executive officer of Bulgari and head of LVMH’s watch and jewelry division, is on the Tiffany board.

Should LVMH’s bid succeed, it would also be getting itself a share of American history. Known for its signature blue boxes, engagement rings and arty silver and gold baubles, Tiffany & Co., which has headquarters on Fifth Avenue in New York, is something of a cultural icon, having been celebrated by Truman Capote’s novel “Breakfast at Tiffany’s,” which was adapted into the namesake film starring Audrey Hepburn.

Tiffany & Co. reported global net sales declined 3 percent to $1 billion in the second quarter ending July 31, while comparable sales slid 4 percent, citing effect of the diminishing spending power of tourists visiting the U.S. and continued unrest in Hong Kong. Tiffany & Co.’s company shares closed at $98.55 on Friday. But Tiffany has seen a rebound in business over the last few years following the appointment of Reed Krakoff as chief artistic officer. He helped spearhead at the opening of the Blue Box Cafe at the brand’s Fifth Avenue flagship, and has begun a revamp of its collections for home, men’s jewelry and fine jewelry, including the introduction of the Paper Flowers collection.

The American jewelry company’s current ceo, Alessandro Bogliolo, previously held the position of chief operating officer for North America at Sephora and global chief operating officer at Bulgari, two companies owned by LVMH.

The French luxury group’s latest acquisition was in December 2018, when it bought luxury travel operator Belmond Ltd for $2.6 billion to increase its presence in the hospitality world.

In a research report Sunday, Bernstein analyst Luca Solca said a Tiffany takeover would make sense for LVMH.

“Tiffany is one of the most prominent jewelry brands in the world; it has yet to express its full potential, for example in design jewelry and watches; and it would offer a European conglomerate a more balanced exposure to the USA,” he wrote.

The analyst also underlined the fact that combining Bulgari and Tiffany could make LVMH an even stronger contender in the jewelry sector, in direct competition with Compagnie Financière Richemont, which owns Cartier and Van Cleef & Arpels. Richemont also has been on a bit of an acquisitions spree lately, buying Italian jewelry Buccellati and on Friday revealing a joint venture with Alber Elbaz in fashion.

Rival Kering could also afford to bulk up in hard luxury. It owns Pomellato, DoDo and Qeelin in jewelry and Girard-Perregaux and Ulysse Nardin in watches.

Solca noted that Tiffany is one of only four sizable players in branded jewelry. “Our thesis is that high-quality hard luxury players like Tiffany could end up as prized acquisition targets in the process of the luxury goods industry consolidation eventually,” he noted.

LVMH has a mixed record in buying brands in America. Its acquisition of Donna Karan International in the late Nineties was troubled and it eventually sold the brand to G-III Group for an enterprise value of $650 million, little more than it had paid for it. Marc Jacobs, its other standout American brand, has struggled in recent years and remains in turnaround mode after a string of management shakeups and changes in strategy.

The French luxury group also declined to comment on the rumors of a possible Prada takeover.

Had a deal happened, it would not have been the first time the two luxury giants worked in tandem. LVMH and Prada Group jointly acquired 51 percent of Fendi in 1999. LVMH bought Prada’s stake in November 2001 before taking full control of Fendi.

A Prada spokesperson declined to comment on the LVMH talks.

Prada’s shares closed down 0.62 percent at 24.10 Hong Kong dollars on Friday, while the stock is down 12.2 percent year-on-year. Shares in Prada have nearly halved over the past five years.

In the six months ended June 30, Prada’s sales rose 2 percent to 1.57 billion euros. At constant exchange, revenues were flat. Operating profit decreased 13 percent to 150 million euros, impacted by continued investments in the brands. Net profits jumped 46.6 percent to 155 million euros, getting a boost from tax relief relating to the years 2015 to 2019.

LVMH reported a 17 percent rise in sales for the third quarter, driven by its key fashion and leather goods division, which includes Louis Vuitton, Dior and Fendi.

Sales totaled 13.32 billion euros in the three months ending Sept. 30, up 11 percent on an organic basis, the company said, despite the sharp drop in tourism in Hong Kong as a consequence of nearly four months of violent antigovernment protests. Analysts estimated that Hong Kong accounts for around 6 percent of LVMH’s overall sales, and 5 to 10 percent of global luxury sales.

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