LVMH MOËT HENNESSY:
LOUIS VUITTON SE'S B
ID FOR TIFFANY &
On October 28, 2019, LVMH Moët Hennessy
Louis Vuitton SE (LVMH) put in an unexpected offer to
acquire Tiffany & Co. (Tiffany) for US$14.5 billion, or $120 per share, a 20 per cent premium over
Tiffany's closing price the previous day
. This hostile offer, which was not initiated by the target company,
was a specialty of
LVMH's chief executive officer (CEO)
, Bernard Arnault. Over the years, LVMH, a
luxury goods empire, had been aggressively trying to expand its wealthy product portfolio, and acquiring
Tiffany would be a great way to materialize this expansion plan. The CEO of Tiffany, Alessandro Bogliolo,
would need to decide whether this acquisition was right for the company, and, if so, whether the initial bid
price was acceptable. With the luxury industry including other large conglomerates such as Richemont and
Kering, was LVMH the right acquirer and was the price right?
TIFFANY & CO.
In 1838, Charles Lewis Tiffany founded Tiffany as a stationery and fancy goods emporium. In 1878,
Tiffany began its journey into diamonds, acquiring one of the rarest diamonds at the time and thus launching
its famous line of engagement rings.
Tiffany sold jewellery, sterling silver, china, crystal, stationery,
fragrances, water bottles, watches, personal accessories, and leather goods.
Its famous rare diamonds were
regularly worn by Hollywood A-listers, while its more mainstream products were appropriate gifts for
countless occasions (e.g., anniversaries, graduations, and engagements).
signature duck-egg blue
box, known as
the little blue box,
was recognized worldwide as the sign of a loving gift. Tiffany had
gained a strong brand image and customer loyalty, and had become a first thought for customers when
considering a gift. Unlike most luxury goods companies, Tiffany had a stronghold on the millennial
segment, an important customer base for future growth.
Recently, Tiffany had undergone a tumultuous leadership turnover, with CEO Frederic Cumenal having
fired in February of 2017 due to Tiffany's financial difficult
ies. He was replaced by interim CEO
Michael Kowalski until July 2017, when new CEO Alessandro Bogliolo was appointed. Bogliolo was the
former CEO of Sephora, a subsidiary of LVMH. With this overlap, Bogliolo would likely be a good fit
under the LVMH umbrella, given his previous experience working with the conglomerate in a CEO role.
Tiffany's recent financial performance ha
d not been exemplary. Although
stock was trading at
$98.55 per share in October 2019, it had dipped as low as $80.57 per share in August of the same year.
Tiffany had a sizable amount of fixed assets that it could use as collateral. The S&P had rated its debt at
BBB+. Based on historical data, Tiffany
was estimated to be approximately 1.25.
debt-to-equity ratio is about 8.7%; that is, debt is 8% and equity is 92% in its capital structure. More of
recent financial information is provided in Exhibits 1-3.
Louis Vuitton Malletier started his career as an apprentice trunk maker in Paris, where he birthed the idea
for a flat-top stackable suitcase, and invented his famous blue-and-white-striped canvas trunk. The Second
World War brought tumultuous times for LV, leading the family to bring in a new business-oriented family
member to lead the company, Henry Racamier. He began to acquire companies such as Givenchy and
Veuve, and aggressively grew LV's revenues in the late 1900s. He also took the company public o