LVMH agreed to buy Tiffany & Co. for more than $16.2 billion in the largest luxury-goods deal ever, raising the French conglomerate's profile in jewelry and giving it access to a broader swath of shoppers in the U.S. and Asia.
The owner of the Louis Vuitton brand agreed to pay $135 a share for the U.S. jeweler, according to a statement Monday. That values Tiffany 37% above the closing price before Bloomberg reported an initial approach Oct. 26. Boards of both companies approved the proposal on Sunday, capping a month of talks.
LVMH Chairman Bernard Arnault is challenging Cartier owner Richemont for dominance in the global jewelry business. While LVMH's stable of 75 brands includes Christian Dior fashion and Dom Perignon Champagne, the company hasn't been as prominent in jewelry as in fashion or cosmetics. Acquiring Tiffany would more than double LVMH's jewelry scale and boost its market share to more than 18%, according to Bloomberg Intelligence analyst Deborah Aitken.
"Tiffany makes sense for LVMH because of the scarcity of acquisition targets with global scale and brand appeal in jewelry, the least-crowded category in the luxury sector," wrote Rogerio Fujimori, an analyst at RBC Europe.
The all-cash deal is expected to close in the middle of 2020. LVMH shares rose as much as 2% in morning trading in Paris, approaching a record.
Tiffany's shares rose 6% in premarket trading in New York. They've traded steadily above the initial offer price since Bloomberg News first reported the talks late last month.
The deal cements a successful streak for Arnault's firm, which is worth about 200 billion euros ($220 billion) after its stock price quadrupled during the past eight years. To fuel growth, Europe's richest person has embraced acquisitions, spending more than $12 billion across 19 deals since the start of 2016, according to Bloomberg Intelligence.
Yet even with that spree, LVMH has lagged behind Richemont in luxury jewelry, a significant area of growth in emerging markets such as China. LVMH's last major deal in that area was in 2011, when it acquired the Bulgari brand.
LVMH raised its bid for Tiffany at least twice before coming to an accord, bolstering its offer to $130 from $120 just days ago, according to people with knowledge of the situation. While the company dwarfs Tiffany with sales of about $50 billion, some analysts had predicted LVMH might need to pay even more, with price targets of $140 at Credit Suisse and $160 at Cowen.
The revised price tag may reflect the changing fortunes of Tiffany, where Chief Executive Officer Alessandro Bogliolo has cut back on entry-priced gifting options and revamped its marketing to target younger shoppers after a difficult period when the firm lost track of consumer trends.
Offerings from the 182-year-old brand include $165 heart-shaped earrings, as well as top-end options like a $165,000 diamond chain. The company gets about 44% of its revenue from the Americas and 43% from Asia. The rest comes mostly from Europe.