LVMH and Tiffany will have a short honeymoon

Jewelry performed better during the pandemic than other luxury products, but Tiffany can still outperform the global jewelry market.


carlo allegri / Reuters

Tiffany TIF 0.02%

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Should Hennessy Louis Vuitton be removed. The French buyer is perhaps more concerned with the price of the expensive price.

Tiffany’s shareholders on Wednesday gave their approval for a slight discount on the original merger terms. The jeweler now has a sticker price of $ 15.8 billion, of $ 16.2 billion. This is still a good result for investors who at one stage feared that the transaction could collapse. They earned a 33% premium on the value of the shares before the news of talks between the two parties first leaked in October 2019, although the pandemic reduced the brand’s revenue.

Following the conclusion of the agreement in early January, five top executives in Tiffany will receive a total of $ 100 million worth of gold parachutes and LVMH will begin a refurbishment.

Jewelry performed better during the pandemic than other luxury products. Global sales will decline by 15% in 2020, compared to last year’s levels, based on Bain & Company’s estimates. In comparison, the most expensive watches and clothes will drop at double the rate.

Tiffany may still underperform the global jewelry market. The company’s sales declined by a quarter during the nine months to October. It relies on tourists for a lot of sales, especially on its Fifth Avenue flagship in New York, and its engagement industry suffers as a result of couples delaying marriage.

The strong demand in mainland China this year indicates that the brand still has plenty of room to grow in Asia. The share of its e-commerce business – which is now a major focus for luxury businesses – has doubled to 12% of group sales from last year’s level. And Tiffany has only one-sixth of its stores in Europe, which offers the option to expand as and when tourist spending in the region recovers.

LVMH has a good record in incorporating jewelry brands. When it bought Bulgari back in 2011, the Italian brand had an operating margin of just 8%. According to Jefferies’ estimates, the number has approximately tripled to 25% by 2018. Now that the drama of this merger is over, the work needed to polish up Tiffany can begin.

Write to Carol Ryan by [email protected]

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In the print edition, on December 31, 2020, it appears as “LVMH and Tiffany to end merger drama with a short honeymoon.”