The deal comes after a month of negotiations, with an original $14.5 billion offer rejected by Tiffany & Co. (NYSE:TIF) for undervaluing the company, according to the board. The improved bid from LVMH Moet Hennessy Louis Vuitton SE (EPA:MC) allows the luxury conglomerate to expand into the jewelry industry, which was one of the highest performers within the luxury industry in 2018. The move also gives the Paris-based firm a more direct line of access to the U.S. luxury market and its strong customer base.
Tiffany’s share price has been on a high since the first bid from LVMH, with opportunistic buyers hoping to cash in on an enhanced offer. The stock made an initial jump of more than 30% when markets opened Monday October 28th when the first bid was put on the table. Since then it has hovered around the $125 dollar mark, with investors confident a deal between the two brands could be reached.
While Tiffany & Co. remains an iconic brand, it has found itself struggling recently thanks to the U.S.-China trade war. The New York-based jewelry company identified a drop in sales to tourists of about 25%, mostly thanks to a lack of Chinese tourists, with the Chinese government warning the public against traveling to America. As if this wasn’t enough, Tiffany’s also found itself in hot water with the Chinese over an advertisement which seemed to be in support of the protests in Hong Kong. The ad has since been removed, with Tiffany representatives stating the advertisement had no political intent and was made before the protests began.
While Tiffany & Co. is definitely a fixer-upper, investors are confident LVMH is up to the task, with its share price receiving a 2% bump since the deal was announced. In LVMH, Tiffany’s has found a home alongside some of the most recognizable brands in the world. With the French company’s experience in reviving luxury brands and the iconic history attached to the New York franchise, we here at MyWallSt think this is a great fit for all involved.
Financial Analyst at MyWallSt
Michael's first and favorite stock is Square, which he sees becoming a massive player in the payments industry and a leader in the war on cash.