LVMH Tiffany Deal
In November 2019, French fashion conglomerate LVHM made a bid of $16.2 billion for Tiffany & Co, the multinational luxury jewellery chain. In so doing, LVMH would add the brand to its ever-growing stable that includes Louis Vuitton, Dior, and Givenchy. Moreover, the LVMH Tiffany deal would increase the LVMH foothold in the United States, the world’s largest luxury market. At the time of the initial offer, the Tiffany & Co. share price was $135.
COVID-19 and Disputes
Then COVID-19 came along and rocked global economies and businesses alike, with Tiffany & Co. recently reporting a 37% decline in sales. In the early months of the pandemic, LVHM and Tiffany & Co. were in dispute over the deal and it looked as if it would fall through. Finally, both parties agreed to a sale price of $15.8 billion, equivalent to £131.50. This meant that LVMH was paying $400 million less – or were they?
Going Back in Time
In mid-2016, the Tiffany & Co. share price was languishing at $61, less than half of its current value. In an attempt to get the brand into shape, an activist investor Jana Partners LLC came on the scene and installed Alessandro Bogliolo as the new Tiffany & Co. CEO in October 2017. Part of Bogliolo’s LinkedIn resume was being the Global MD of LVMH’s Bulgari. By the end of 2017, the Tiffany & Co. share price was $104.
How to Save $4 Billion
The Tiffany & Co. share price has fluctuated since Bogliolo’s installation, having lows of $76 and $81 in December 2018 and August 2019, respectively. Now do some basic arithmetic. Assume that LVMH made a bid for Tiffany & Co. in December 2018 and agreed to pay a premium of over 30% to purchase the brand at $100 a share. LVMH would have saved a phenomenal $4 billion.
In the Sky with Diamonds
So why pay $4 billion more in 2020? What have the LVHM strategic advisors been doing with their time? Perhaps they are in the sky with diamonds while Alessandro Bogliolo with his share options stands to make $36 million from the LVMH Tiffany deal.
