LVMH Moet Hennessy Louis Vuitton plans to acquire Bulgari for about e3.7 billion (R35.6bn) to add the third-largest jeweller in what would be its biggest acquisition in at least a decade.
The world’s largest luxury goods company has agreed to purchase the Bulgari family’s 50.4 percent stake for e1.87bn in stock and will then make a tender offer for the rest, according to a joint statement distributed by the Italian Exchange yesterday. The acquisition represents a 61 percent premium to Bulgari’s Friday closing share price in Milan.
Chief executive Bernard Arnault has built LVMH by snapping up brands from Donna Karan International to Glenmorangie. LVMH owns 20.2 percent of Hermes International after purchasing a stake without the knowledge of the company’s founding family. He is buying the maker of $18 900 (R129 000) Sotirio Bulgari retrograde date automatic watches as the Rome-based company’s sales growth trails larger rivals including Richemont. Bulgari is adding lower-priced items and high-end watches as demand rebounds after the recession.
“We see this as a great deal for Bulgari shareholders,” Helvea analyst Alessandro Migliorini wrote yesterday in a note. “In contrast, it remains to be seen whether LVMH’s financial muscle and organisational strength will suffice to extract sufficient value to justify the acquisition price.”
LVMH is paying 26.4 times earnings before interest, tax, depreciation and amortisation (Ebitda) for the family’s stake. The company paid 15.49 times Ebitda for a 17.1 percent stake in Hermes, which was acquired through equity swaps. The average multiple paid for jewellery retailers in the past decade is 8.5 times.
“Our entrance into LVMH will allow Bulgari to reinforce its worldwide growth and to realise significant synergies,” Bulgari chief executive Francesco Trapani said. He would join LVMH’s executive committee and replace Philippe Pascal as head of watches and jewellery, the French firm said. – Bloomberg