By Barbara Kollmeyer, MarketWatch
Tiffany & Co. stock soared on Monday after the company became the takeover target of a wealthy French suitor.
LVMH Moët Hennessy Louis Vuitton SE /zigman2/quotes/206499835/delayed IT:LVMH -6.45% announced an unsolicited bid for the 182-year old company. sending Tiffany /zigman2/quotes/209249105/lastsale TIF -1.30% shares 31% higher in New York, and putting them on track for the biggest one-day percentage gain since May 2018.
The French luxury goods giant confirmed it had set its sights on the owner of “The Tiffany Blue Box” on Monday, following a weekend of speculation in The Wall Street Journal and elsewhere. LVMH said in a statement that there was no assurance the $120-per share cash bid would be accepted.
LVMH’s bid represents a premium of 30% or more to where Tiffany traded when the offer was made, The Wall Street Journal reported, citing sources. The offer would value Tiffany at around $14.5 billion. That company said in a statement the “parties are not in discussions” but, as is “its fiduciary responsibility,” it is reviewing the proposal.
Gains for LVMH — up 0.2% in Paris — were hardly as celebratory, but are up 48% year-to-date, making it one of the best-performing luxury-goods names. The company will likely have to up its bid to lure in Tiffany, while others said some investment would likely have to be made in the iconic jeweler that has been struggling to improve its revenue prospects for several years.
The LVMH portfolio includes the namesake Louis Vuitton and Fendi brands, as well as the Hennessy and Chandon brands, Bvlgari jewelry and more. Analysts were able to rattle off several reasons why it should add one more big name to the moat.
“Based on our analysis, LVMH has ample financial capacity for a deal and we also expect many strategic and financial synergies given margin expansion, product extension, and global growth opportunities at Tiffany,” wrote Cowen analysts in a note.
The scarcity of acquisition targets in jewelry makes Tiffany a company that LVMH should pursue, added analysts at RBC. The American company has “global scale & brand appeal” and hard luxury is the only subsector where LVMH is not a leader, they said. Plus, jewelry is the least crowded category in the sector, with just a few truly global players.
LVMH is the world’s No. 1 luxury company in terms of sales, while Tiffany is ranked at number 18. It shares are up 22% year-to-date, but are also currently trading at levels seen in 2015.
See also: China’s U.K. shopping spree looks shaky
Adding Tiffany to its trove of companies makes strategic sense for LVMH, and there are few hard jewelry players to buy. Tiffany, meanwhile, should not shut the door given Bvlgari became much more successful after a 2011 takeover by LVMH, several analysts noted.
“Continuing consolidation in luxury makes sense given the shift to e-commerce, importance of the Chinese market (we believe one third of sales, across all geographies) and likely synergies,” said analysts at KeyBanc Capital Markets in a note.
Elsewhere in Europe, shares of Cie. Financière Richemont SA /zigman2/quotes/203783259/delayed CH:CFR -4.03% jumped 2.7%, though RBC analyst said Tiffany under LVMH would be much stiffer competition for th Swiss-based luxury goods holding company.
Tiffany shares have gained 60% in 2019, while the S&P 500 has gained 21% and the Dow Jones Industrial Average has gained 16%.
— Tonya Garcia contributed to this article