The acquisition deal was finalized between LVMH, a Paris-based company, and US-based Tiffany & Co., the two leading luxury companies, on November 24, 2019. LVMH is expected to acquire Tiffany & Co., for about $ 16.3 billion.
It has agreed to buy the latter’s share at a price of $ 135 per share, which used to be priced at nearly $ 140 per share in mid-2019; however, it’s share price closed at $ 125.51 on Friday, November 22, 2019.
Development of Jewelry Competition
Since its establishment in 1837, Tiffany & Co. had been a major company for luxury goods, including jewelry.
The company has been facing a long-term low turnover of annual sales since 2015, though its revenue increased slightly in 2017.
Despite its expansion overseas in China, the company continues to suffer a sharp decline in sales in the US and countries in Asia due to the turbulence caused by the US-China trade deal.
Jewelry has been a lucrative field of luxury businesses. According to Bain & Co, a management consultancy, the sale of jewelry items is expected to by grow 7% in 2019 as compared to the last years’ global sale of $ 20 billion.
Expansion for LVMH to Stay Competitive
LVMH plans to expand by its business by acquiring Tiffany & Co., thus adding new luxury items, including the bridal and diamond category, which will attract more customers.
The acquisition is crucial for LVMH’s business expansion because its rival companies such as Gucci’s subsidiary Kering, and Richemont’s subsidiary Cartier, have increased their investments in jewelry-related products.
The acquisition of Tiffany & Co. will boost LVMH’s production of jewelry and watches by establishing designing houses, especially in the US.
Since its foundation in 1987, LVMH has been one of the leading producers of luxurious products. LVMH has an annual revenue of about $ 50 billion, as it is a conglomerate company that includes Louis Vuitton and Dom Perignon.
Strategic Views of the Company
In the backdrop of the acquisition, The LVMH’s CEO, Bernard Arnault states,
“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. We have 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.”
According to Alessandro Bogliolo, the CEO of Tiffany, “Tiffany has been focused on executing on our key strategic priorities to drive sustainable long-term growth.
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 Jeweler.
As part of the LVMH group, Tiffany will reach new heights, capitalizing on its remarkable internal expertise, unparalleled craftsmanship, and strong cultural values.”
Both the companies, LVMH and Tiffany & Co., will be working independently before the settlement of deal, which is likely to conclude in the mid-2020.
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