LVMUY LVMH Moet Hennessy Louis Vuitton SA (PK)

By Ben Dummett and Suzanne Kapner 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 28, 2019).

Tiffany & Co. has received a takeover approach from LVMH Moët Hennessy Louis Vuitton, which is seeking to add the iconic U.S. jeweler to its portfolio of upscale brands.

The French company sent Tiffany officials a letter in the past couple of weeks outlining an all-cash takeover bid of roughly $120 a share, according to people familiar with the matter. That would value Tiffany at close to $14.5 billion.

The companies aren't in talks but Tiffany is expected to work quickly on a response, some of the people said. Even though the bid represents a premium of 30% or more to where Tiffany traded when the offer was made, according to one of the people, LVMH is expected to have to pay up even more if it wants to clinch the deal.

Shares of New York-based Tiffany closed Friday at $98.55, giving it a market value of nearly $12 billion. The stock reached nearly $140 a share during the summer of 2018.

LVMH has a market value of EUR193 billion ($214 billion). Bloomberg earlier reported on LVMH's interest in Tiffany.

Buying Tiffany would increase Paris-based LVMH's exposure to jewelry, one of the fastest-growing businesses in the luxury sector. In 2018, the global jewelry market grew 7% and was worth about EUR18 billion, according to Bain & Co. Tiffany, with more than 300 stores globally, is one of the world's largest jewelers, along with Cartier and LVMH-owned Bulgari, but it has been unable to keep pace with European rivals.

Tiffany, which has about $4 billion in annual revenue, has struggled with lackluster sales growth for years.

The 182-year-old brand has been trying to rebuild its business after ousting its chief executive two years ago amid pressure from an activist investor. The stock, which had slumped near $60 in 2016, has been hovering around $100 for much of the past year.

Under CEO Alessandro Bogliolo, the jeweler has pushed an expansion into China, with plans to open flagship stores in several major cities. The chain, which relies heavily on tourist spending in the U.S. market, also has been renovating its flagship New York store on Fifth Avenue.

Tiffany also has tried to broaden its appeal with marketing that includes more minorities and same-sex couples, added new products for younger shoppers and introduced a jewelry line for men.

But in recent quarters sales have slipped both in the U.S. and Asia. Excluding currency swings, comparable sales have declined from a year earlier for two straight quarters. In August, executives cautioned that the protests in Hong Kong and a macroeconomic slowdown could damp profits for the rest of the year.

Luxury-goods companies have been pressured by fears of an economic slowdown in China, where shoppers account for roughly one-third of luxury-goods purchases world-wide. Escalating trade tensions also have played a part in waning consumer confidence in China.

Tiffany would be one of the biggest acquisitions yet by Bernard Arnault, LVMH's chief executive and controlling shareholder. Mr. Arnault paid EUR12 billion in 2017 to unite the storied fashion house Christian Dior with LVMH.

LVMH, which has roughly $50 billion in annual revenue, also relies on Chinese shoppers for a chunk of its sales. But the conglomerate is so large and has so many brands -- from Louis Vuitton to Dom Pérignon -- that it has fared better than Tiffany in recent years. Revenue jumped in its latest quarter, showing little impact from the Hong Kong protests or the U.S.-China trade tensions.

LVMH could use its deep pockets to develop product lines where Tiffany is weak. In addition to Bulgari, LVMH owns luxury watchmakers Hublot and TAG Heuer.

"Tiffany has yet to express its full potential -- for example in design jewelry and watches," says Bernstein & Co. analyst Luca Solca.

The deal would significantly expand LVMH's presence in the U.S., giving it more exposure to U.S. dollar-denominated revenue and reducing foreign-exchange risk, Mr. Solca says.

Tiffany's Mr. Bogliolo is familiar with LVMH; he spent 16 years at Bulgari before LVMH took control of the company in 2011 and then served as North American operating chief at LVMH's Sephora unit for a little more than a year. Before joining Tiffany, he was CEO of Italian apparel company Diesel SpA.

--Matthew Dalton contributed to this article.

Write to Ben Dummett at ben.dummett@wsj.com and Suzanne Kapner at Suzanne.Kapner@wsj.com

(END) Dow Jones Newswires

October 28, 2019 02:47 ET (06:47 GMT)

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