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Luxury retailers LVMH and Tiffany & Co have been in talks for ”some time” about a possible deal, a person familiar with LVMH’s strategy told dealReporter. But the price threshold has so far proven an impediment as a transaction would be deemed too expensive for the listed French luxury goods and alcoholic beverages group, the person said. He would not elaborate on the price level.
An industry banker said he had also heard that LVMH was holding up a possible deal with Tiffany because its stock was fully valued. Tiffany is currently trading around USD 48 a share, up 5.12% after reporting better than expected earnings for 1Q 2008. A Tiffany shareholder claimed to have heard that LVMH was willing to offer USD 51 per share for Tiffany, but Tiffany is asking for USD 54-56 per share. A second industry banker following the situation said given Tiffany’s total assets, current trading price and outstanding shares, an offer of USD 53 would be fair.
The shareholder said he would be in favor of a deal as it would provide Tiffany with global growth, which he said is a big focus at present. Further, he said it would give LVMH a push into the jewelry sector, which he believed LVMH was keen on doing.
While a spokesperson for Tiffany declined to comment to this news service on a possible deal with LVMH, the second banker said a deal between the two luxury brands would be a good fit for both companies. In addition, the banker said that Tiffany is looking to grow its business internationally and a deal with LVMH would help it do so. He noted that activist shareholder Trian Fund Management, which owns an 8.5% stake in Tiffany and recently was granted a seat on the company’s board of directors, has been pushing Tiffany to add luxury accessories like handbags to its offerings, making a deal with LVMH ideal. The banker also noted that LVMH is looking to increase its exposure to the jewelry industry, especially within the US. Tiffany’s spokesperson said the company had invited Peter May, founding partner of Trian, to join the board. The spokesperson said the company was not concerned about Trian’s activist past or May’s influence on the board.
Bernard Arnault, CEO of LVMH, said during the company’s annual shareholder meeting last Thursday that while the group was focusing on internal growth, it would consider acquisition opportunities in the watches and jewelry sector. When asked specifically about a deal with Tiffany, Arnault did not deny an interest in the retailer. Arnault also said the company’s recent acquisition of Swiss watchmaker Hublot was ”relatively modest” in terms of price, a possible indication the company still had the means to finance a larger acquisition such as Tiffany. A spokesperson for LVMH did not return calls seeking comment.
While there has been much buzz about a deal between LVMH and Tiffany, there has also been some speculation that handbag maker Coach would also be interested in acquiring Tiffany. However, both industry bankers ruled out such a scenario. The second banker said Coach really is not a consideration for a deal with Tiffany as it is a low-level luxury brand and Coach does not have an international presence. He also questioned whether Coach could receive the financing for such a deal. The first banker agreed that Coach is not on the same luxury level as Tiffany and that a deal between the two is unlikely.
A Coach spokesperson said the company has no interest in making any acquisitions but remains focused on reinvesting and growing its core business.
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