European conglomerate LVMH Moët Hennessy-Louis Vuitton SE has agreed to buy Tiffany & Co. (NYSE: TIF) in a deal worth about $16.2 billion. The deal values Tiffany at $135 a share, a 7.6 percent premium over its share price before the agreement was announced. The deal is expected to close in the middle of 2020. The acquisition has already been approved by the boards of directors of both companies.
The deal is not unexpected. Back in October, both companies confirmed that they were in talks to combine. At that time, LVMH had already submitted an unsolicited initial offer of $14.5 billion. The deal is one of the largest in the history of the luxury sector.
LVMH has long been the top seller of high-end goods. The Paris-based group encompasses 75 high-end brands, including Louis Vuitton, Bulgari, Givenchy, Christian Dior, Dom Pérignon, and Fenty Beauty. LVMH is among Europe’s most valuable companies, with a market value of roughly $220 billion. The market for personal luxury items was nearly $290 billion last year.
Buying Tiffany will bolster LVMH’s jewelry and watch lineup. Sales in its jewelry and watch division, which includes legacy brands Hublot and TAG Heuer, make up only 9 percent of the company’s total revenue. Jewelry is one of the strongest segments in the worldwide luxury industry. According to Bain & Co., sales of luxury jewelry rose 7 percent in 2018 to roughly $20 billion.
Tiffany’s, long one of the best-known American jewelers, employs 14,000 people and operates 300 stores around the globe. The company makes about $4.4 billion in annual revenue, but has struggled in recent quarters with weaker-than-expected sales. In its most recent earnings report, the company said that sales fell 3 percent and profits were down 6 percent. The company attributed those declines to the strong dollar and slowing international tourism.