LVMH takes Italy's Bulgari for 4.3 billion euros

7th March 2011, Comments 0 comments

LVMH, the world's top luxury retailer, said Monday it will take control of Bulgari for 4.3 billion euros ($6.0 billion) in a deal to challenge Cartier and Tiffany in the jewellery business.

Bulgari, whose jewels are worn by the likes of Sofia Loren, Tina Turner and Keira Knightley, will receive 16.5 million shares from LVMH worth 1.9 billion euros for the family's 51 percent holding.

The deal initially failed to impress investors, with the French company's shares sliding 0.26 percent on the announcement, but they ended the day up 1.26 percent to 112.95 euros on a market down 0.74 percent.

Bulgari's shares shot up nearly 60 percent in Milan, as under the terms of the agreement LVMH will also offer other Bulgari shareholders 12.25 euros a share, a 63 percent premium from Friday's closing price.

LVMH said it would finance the remaining 2.4 billion euros of the operation from its resources and through bond issues.

Bulgari will become the second largest family shareholder in the LVMH group, taking two seats on the board.

Founded in 1884 by Greek immigrant Sotirios Bulgari, the small jewellers in Rome's historic centre shot to fame when actress Liz Taylor wore one of its diamond and emerald broaches at her 1964 wedding to Richard Burton.

In the 1970s, Bulgari opened stores in New York, Paris, Geneva and Monte Carlo. By 1993, the jewellers had branched out into perfumes and has since extended their luxury brand to accessories and hotels.

A Bulgari statement said that the company found in LVMH and its French multi-billionaire owner Bernard Arnault everything it felt it needed to guarantee its future.

Arnault called the deal an "ideal arrangement at every level."

However later on LCI television he described the deal as "more an association than a transaction," adding that "the family is not selling its shares."

Founders Paolo and Nicola Bulgari will be on the new board of directors along with current Bulgari board member Francesco Trapani, he added.

"It's more the fruits of a coming together of management styles, of brand development, than a financial question," Arnault insisted.

LVMH, which counts among its brands Givenchy, Dior and Guerlain perfumes alongside Moet and Chandon and Dom Perignon champagnes, is one of the most successful luxury retailers in the world.

Analysts said that Bulgari would help strengthen LVMH in jewellery and watches, two areas where it has been relatively weak.

"LVMH doesn't have for the moment a brand with international appeal" in jewellery, said Francois Arpels of the Bryan Garnier investment bank.

Luxury jewellery and watches usually generate higher margins, he noted.

"With Bulgari, we can become a real challenger to Cartier," said a source close to the deal who called it a "rare and strategic opportunity" for LMVH.

Bulgari ranks number three in the world in jewellery behind Cartier and Tiffany.

"It is a win-win deal," said a source close to LVMH.

"The operation is completely friendly, the (Bulgari) family is joining with LVMH and it wants to work with Bernard Arnault," the source said in a reference to LVMH's smaller French rival Hermes.

LVMH recently bought a large stake in Hermes, spurring the Hermes family to erect defences to keep their control of the company.

LVMH has insisted that speculation it wants to ultimately control Hermes company is without foundation.


© 2011 AFP

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