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Can LVMH make Tiffany shine?

LVMH has clinched a deal to buy the jewellery group Tiffany & Co for $16.6bn, marking the largest takeover on record in the luxury sector. But is the deal worth it?

Tiffany gift box © iStockphotos

LVMH has clinched a deal to buy the jewellery group Tiffany & Co for $16.6bn, marking the largest takeover on record in the luxury sector. Not only is it $600m more than LVMH originally offered, but it also represents a premium of 37% to Tiffany's pre-bid share price. While many experts think that Tiffany has "fallen off the list of top-tier brands", says the Financial Times, it still has a "considerable" footprint in the US and remains "popular with Asian consumers". It will join a portfolio of brands that include Bulgari, Louis Vuitton, Dior and Sephora. The high premium means that to make the deal worthwhile, LVMH will have to apply "slightly more polish to the Tiffany diamonds", expanding the jeweller's annual sales as well as increasing its margins, says Bloomberg's Andrea Felsted.

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Still, LVMH's "scale and track record", as well as its "clout" with Asian landlords, mean that these targets should be "achievable". LVMH's "muscular marketing machine" will also help Tiffany step up the pace of its product development. Not so fast, says Jim Armitage in the Evening Standard. While LVMH boss Bernard Arnault will hope to repeat his successful 2011 takeover of Bulgari by moving Tiffany "exclusively upmarket", this is "no easy task".

A fifth of Tiffany's sales are currently in lower-end silver jewellery. Meanwhile, developing new product lines to justify a new status as a "super high-end" brand will "take years and hundreds of millions of euros". The fact that Tiffany is also a "far better-run" business than Bulgari also means that there is less scope for improvement. The "deafening applause" at today's deal may soon "falter".

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