Can LVMH make Tiffany shine?

published 28 November 2019

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.

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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Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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