Jewel in the crown: LVMH to buy Tiffany for $16.2bn

French conglomerate LVMH is splurging $16.2bn to buy United States jeweller Tiffany, the company confirmed on Monday, sealing the luxury goods maker’s biggest purchase to date as it seeks more US customers.

The parent firm of Louis Vuitton agreed to pay $135 a share for the jewellery firm, according to its statement on Monday, valuing Tiffany shares at 7.5 percent above their closing price on Friday and higher than an initial $120-a-share bid in October.

The deal will boost LVMH’s smallest business, its jewellery and watch division that currently houses Bulgari and Tag Heuer.

Fashion and accessories brands including Christian Dior generate the bulk of the earnings at the conglomerate, which is run by France‘s richest man, Bernard Arnault.

“The acquisition of Tiffany will strengthen LVMH’s position in jewellery and further increase its presence in the United States,” LVMH and Tiffany said in a joint statement.

Tiffany CEO Alessandro Bogliolo said the transaction would “provide further support, resources and momentum.”

With the acquisition of Tiffany, LVMH is in a stronger position to challenge Richemont, the owner of Cartier, for dominance in the global jewellery business.

The companies said they expected to close the deal in mid-2020. Tiffany said in the statement its board of directors recommended that shareholders approve the transaction with LVMH.

Founded in New York in 1837 and known for its signature robin’s egg blue packaging, Tiffany is one of the best-known names in the sector and featured in the movie Breakfast at Tiffany’s starring Audrey Hepburn.

But the label is in turnaround mode after struggling to win over younger shoppers in recent years.

It now also has to contend with a Washington-Beijing trade war and shifting spending patterns as Chinese shoppers retreat from the US and spend more at home.

“Tiffany’s brand equity and the strength of the image of its iconic 1837 Blue Box are more valuable than the current financials suggest,” Jefferies analyst Flavio Cereda said in a note published just before the deal was confirmed.

“LVMH can leverage off these to launch a more concerted ‘attack’ on the Asian millennial market.”

Chinese consumers in their 20s and 30s are helping to fuel growth across the luxury goods industry.

Growth in jewellery outpaced that of other businesses such as fashion in 2018, according to consultancy Bain & Co, which forecast comparable sales in the $20bn global jewellery market were set to grow 7 percent this year.