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Business

Tiffany shares surge 32 percent on takeover offer from LVMH

By
Lisa Fickenscher
Published Oct. 28, 2019
Updated Oct. 28, 2019, 4:11 p.m. ET

Tiffany & Co. isn’t engaged yet, but Wall Street is already planning for a big, expensive wedding.

Shares of the 182-year-old jeweler soared more than 30 percent on Monday after it confirmed it received a $120-a-share takeover offer from LVMH, the French luxury giant that produces Louis Vuitton handbags, Bulgari watches and Dom Perignon champagne.

The offer values Tiffany at $14.5 billion, and represents a 22-percent premium to Tiffany’s closing price on Friday. The stock surged to a 52-week high of $130.40 before closing at $129.73, up nearly 32 percent.

That’s an indication that investors expect LVMH’s hard-charging boss Bernard Arnault — Europe’s most richest man, according to Forbes, with an estimated net worth of $99.2 billion — to sweeten his bid.

In a Monday statement, Tiffany said its board of directors was reviewing the offer with a team of advisers including Centerview Partners, Goldman Sachs and Sullivan & Cromwell.

Arnault — who in 2017 gave up on a controversial, yearslong courtship of rival handbag maker Hermes — has likewise coveted Tiffany for years, according to industry sources.

“It’s been a rumored deal for a decade,” said Edward Jones analyst Brian Yarbrough.

Arnault is apparently looking for a bargain on Tiffany shares, which have lately tanked as President Trump’s trade war with China has crimped spending by Chinese tourists at its Fifth Avenue flagship.

The jeweler, which derives 41 percent of its sales from the US, is currently in the middle of a turnaround under new management. Research firm Euromonitor expects Tiffany will struggle with sluggish sales for the next five years.

Nevertheless, analysts say Arnault will have to boost his bid if he wants to own the New York-based icon, which is as famous for being Audrey Hepburn’s favorite store in “Breakfast at Tiffany’s” as it is for the legendary, century-old lamp designs of Louis Comfort Tiffany.

Keybanc analyst Edward Yruma wrote in a Monday research note that “a transaction looks reasonable in the $125-$130 range.” But Edward Jones’ Yarbrough believes “it has to be north of $140,” anticipating that Tiffany will argue its shares have more upside because of its turnaround efforts.

While LVMH said Monday it has held “preliminary discussions regarding a possible transaction with Tiffany,” the jeweler emphasized that “the parties are not in discussions” at the moment, although its directors are “carefully reviewing the proposal.”

“Tiffany’s statement is a way for them to distance themselves from appearing to have sat down with LVMH,” said a source with knowledge of the jeweler’s thinking.