LVMH snaps up jeweller Bulgari in €3.7b deal
PARIS, March 7 – France’s LVMH will take over Bulgari in a deal which values the Italian jeweller at €3.7 billion (RM15.74 billion) and gives the No.1 luxury group more clout in the sector and bigger exposure to emerging markets.
The offer, which priced Bulgari’s shares at a 60 per cent premium to its average level over the last month, could herald the return of consolidation in the luxury market, which bounced back from the 2009 slump much faster than analysts expected.
For LVMH, adding Bulgari will allow the French luxury group to leverage its global retail network and boost margins by sharing costs.
Founded by billionaire Bernard Arnault, LVMH is built solely on acquisitions. Its brands now include Louis Vuitton handbags, Chaumet and Fred jewellery, Celine and Kenzo fashion, Hennessy cognac and Moet & Chandon champagne.
“Bulgari is one of the best known jewellery brands in the world, with lots of potential to grow on the back of LVMH’s global distribution reach and financial muscle,” Bernstein luxury analyst Luca Solca said.
“Media buying and retail development would benefit from the deal. Watches and jewellery is indeed the weakest area at LVMH, where its brands are trailing larger and better known competitors.”
Bulgari had long been seen as a potential target having weakened its finances by embarking on big store investments when its sales were falling. There was regular speculation Switzerland’s Swatch Group AG could take it over.
The transaction comes after LVMH built up a 20.2 per cent stake in smaller rival Hermes which, like Bulgari, is family controlled. That move prompted Hermes to fight back by creating a controlling family holding within the group to block LVMH’s advance.
LVMH will buy 50.4 per cent of Bulgari, issuing 16.5 million shares in exchange for 152.5 million shares held by the Bulgari family, the companies said in statements today.
The French group also will launch a buyout offer for the rest of Bulgari shares at €12.25 a share. The shares closed at €7.59 on Friday and the offer carries a 59.4 per cent premium over the average price of the last month.
The deal values the jeweller at about €3.7 billion based on Friday’s closing price of €111.55 for LVMH shares and using €12.25 for the free-floating Bulgari shares, according to Reuters calculations.
Kepler analyst Jon Cox said the deal strengthened LVMH in the “hard luxury” segment for watches and jewellery. It will be closely watched by Swatch and Compagnie Financiere Richemont, he said.
“Whether this leads to further M&A I am not sure, given attractive assets are pretty limited in the watch-making sense. Rolex, Patek and Chopard are owned by families and foundations and are in far stronger shape than Bulgari,” he said.
Shares in Bulgari were up 58 per cent at €12.01 by 0933 GMT. LVMH shares were little changed at €111.60 after earlier losing almost 2 percent.
Bulgari, established in 1884, agreed to the takeover “in order to reinforce, in accordance with its history, values, craftmanship and identity, the long-term development of the Bulgari Group”, the company said.
Under the deal, the Bulgari family will become the second-biggest family shareholder in LVMH. Chief Executive Bernard Arnault’s Groupe Arnault holds 47.6 per cent of LVMH.
The Bulgari family will name two representatives to the LVMH board. Bulgari Chief Executive Francesco Trapani will join LVMH’s executive committee and take on management of LVMH’s watches and jewellery activities in the second half of the year.
“This should be a catalyst for possible targets in the sector,” a French broker said. “As such, we would (see ...) that as a positive for Burberry Group Plc notably.”
Trapani said last summer that his family had no plans to relinquish control of the group. – Reuters