LVMH bags Italian Jeweller BULGARI
- Greg Keller/ Associated Press/8 Mar 2011/Globe and Mail
French fashion colossus LVMH Moët Hennessy Louis Vuitton SA is adding another jewel to its crown: Italy’s Bulgari SpA.
The unexpected tie-up on Monday generated new buzz during an already frenzied Paris Fashion Week. And it puts LVMH, run by France’s richest man, in an even better position to woo nouveau riche consumers in countries such as China and Russia who are clamouring for Old World status markers like Louis Vuitton leather bags and Bulgari’s diamondand-emerald-encrusted jewellery.
LVMH, the Paris-based holding company behind luxury Christian Dior gowns, Dom Perignon champagne and Guerlain perfume, said Monday it has agreed to buy Italian jeweller-to-the-stars Bulgari SpA in a cash-and-shares deal worth €4.3-billion ($6-billion U.S.).
LVMH managing director Antonio Belloni said Bulgari was the biggest acquisition in LVMH’s more than 20-year history of snapping up luxury brands, from Kenzo to Givenchy to Marc Jacobs.
Both companies presented the deal as a way to quickly bulk up LVMH’s luxury watch and jewellery business, to achieve critical mass and accelerate its growth into hot developing markets.
“We are adding to the mature markets a lot of new markets that are more and more promising, like Russia, China, the Middle East, Brazil, India,” said Bulgari chief executive officer Francesco Trapani, who will get a seat on LVMH’s executive board. Mr. Trapani will head the group’s watch and jewellery division, which also includes De Beers, Chaumet and Hublot.
LVMH’s watches and jewellery business doubled its profit last year to €128-million, on sales that grew 29 per cent to nearly €1-billion. Acquiring Bulgari, a 127year-old watch and jewellery maker, will roughly double the division’s sales to €2.1-billion.
“LMVH is the perfect partner,” Mr. Trapani said, adding the deal’s two vital ingredients were LVMH’s know-how and attention to detail, and its scale, with an enviable global management structure.
Fashion industry observers applauded the deal, saying LVMH needed to plug a gap in its luxury brand portfolio.
“They’ve wanted to buy a big jewellery company for a while,” said Long Nguyen, founding editor of U.S.-based Flaunt magazine. “Not only is it great for them to buy the Bulgari name but they’re also buying the savoir faire of the house for all their stable of brands.”
Another fashion insider, Wall Street Journal columnist Christina Binkley, said “LVMH is good at taking these family owned gems and lighting a fire under them.”
Bulgari’s founding family will become the second-largest family shareholders in LVMH, behind that of CEO Bernard Arnault.
Mr. Arnault has grown LVMH into a €20-billion company since its creation in 1987, acquiring an impressive portfolio of luxury brands that extends to Château d’Yquem wine and TAG Heuer watches. Earnings have benefited from a surge in demand in developing countries like China.
Mr. Arnault’s latest takeover adds the fabled Roman jeweller favoured by Hollywood stars such as Elizabeth Taylor, whose collection included an 18-carat emerald brooch surrounded by diamonds — the only piece of jewellery she wore to her first wedding to Richard Burton. The jeweller also designed the 1967 gold, emerald, ruby and sapphire necklace worn by Keira Knightley at the Oscars in 2006.
LVMH said in a statement it will exchange 16.5 million of its own shares for the 56-per-cent stake in Bulgari owned by the company’s founding family.
LVMH will offer the remaining Bulgari shareholders €12.25 a share in a public offering. Following the deal, the Bulgari family will own 3 per cent of LVMH.
Bulgari is the smallest among the major luxury watch and jewellery makers. It was started in 1884 by Greek immigrant Sotirios Bulgari, who opened the flagship Via Condotti store in Rome in 1905, and has expanded to more than 260 stores.
Mr. Arnault has had less success in his efforts to take over another family owned legend of European luxury, Hermès SA. LVMH said in December that it had built up a 20-per-cent stake in the French maker of exquisite handbags and scarves, provoking the ire of the descendants of the founding Hermès family, who control more than 70 per cent of the company.
The Bulgari announcement comes in the midst of Paris Fashion Week, where some of LVMH’s companies are showing their fall 2011 ready-to-wear collections. LVMH is smarting from a scandal surrounding star designer John Galliano, sacked by Dior last week amid accusations of anti-Semitism.
Luxury goods have seen a lively recovery in demand over the past year, especially in Asia, which helped LVMH post a 73-per-cent gain in 2010 profit to €3 billion.
Comments