LVMH offers to buy Tiffany for $120 per share or $14.5B

Tiffany is expected to reject the offer

According to several sources including Bloomberg, Financial Times and Reuters, Louis Vuitton owner LVMH has approached Tiffany & Co (TIF) with a $14.5 billion acquisition offer, people familiar with the matter said, at a time when the U.S. luxury jeweler grapples with the impact of tariffs on its exports to China.

LVMH, which has for years been looking for ways to expand in the U.S. market, submitted a preliminary, non-binding offer to Tiffany earlier this month, one of the sources said.

LVMH is looking to boost U.S. sales, Stockwinners

LVMH’s offer valued Tiffany at about $120 per share, another of the sources added. Tiffany shares ended trading on Friday at $98.55.

Tiffany is expected to reject the $14.5B offer, Stockwinners

Financial Times reports that Tiffany is expected to rebuff the takeover approach from French luxury group LVMH, with the US jeweller believing the offer undervalues the company, according to people familiar with the matter. Tiffany’s advisers were on Sunday still assessing the surprise indicative offer from LVMH, the world’s largest luxury group by sales, with the board set to consider the next move. 

LVMH, which is behind brands such as Fendi, Christian Dior and Givenchy, as well as Veuve Cliquot champagne, has stood out for several years as one of the top performers in the upscale retail sector in China.

Tiffany, on the other hand, has not been as resilient. Beyond the tariffs that have been triggered by the trade war between the United States and China, a lower Chinese domestic sales tax has also contributed to double-digit decreases in its sales to Chinese tourists in the United States and in other destinations.

High-end brands have also long relied on Hong Kong as a major shopping hub drawing visitors from mainland China in particular, and four months of pro-democracy demonstrations are starting to take their toll.

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Tiffany seen as a take-over target

Tiffany seen as possible target for big European luxury player

Tiffany seen as a take over target. Stockwinners.com
Tiffany seen as a take over target

Shares of Tiffany (TIF) are on the rise after Citi analyst Paul #Lejuez upgraded the stock to Buy, citing currency tailwinds, tax reform and the increasing probability the jewelry retailer becomes a takeover target of an European luxury conglomerate.

BUY TIFFANY

In a research note to investors, Citi’s Lejuez upgraded Tiffany to Buy from Neutral and raised his price target on the shares to $115 from $92.

The third quarter brought several positive inflection points, he contended, noting that it was the first quarter in several years that the company saw strength in both the fashion category and the high/fine/solitaire category at the same time.

Further, Lejuez argued that the shares look attractive as currency tailwinds and tax reform should benefit the company’s earnings.

The analyst also told investors that he sees increasing probability that the jewelry retailer will become a target of an European luxury conglomerate, making Tiffany’s risk/reward that much more favorable.

Management seems to understand the challenges and opportunities and they are not sitting still, he pointed out, making the analyst more optimistic that the changes he has seen thus far have Tiffany on a better path for success.

WHAT’S NOTABLE

Earlier in the month, KeyBanc analyst Edward #Yruma also upgraded Tiffany to Overweight from Sector Weight, with a $115 price target, saying he believes the positive 1% Americas comparable sales growth in the third quarter points to the early stages of a more broad-based sales recovery.

Recent strength in silver jewelry is now being augmented by early signs of improvement in higher-end jewelry, Yruma argued, adding that he views Tiffany as a “strong brand.”

PRICE ACTION

In Thursday’s trading, shares of Tiffany have gained over 3% to $99.27.


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This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.