Tiffany & Co. (TIF) - Get Tiffany & Co. Report shares surged higher Monday after France's LVMH Group (LVMUY) agreed to buy the U.S. jeweler for $16.2 billion in the biggest-ever luxury goods takeover deal.
LVMH, the French group behind luxury labels such as Christian Dior, Fendi and Givenchy, said it would pay $135 a share for Tiffany a $10 premium to the stock's Friday closing price and some 37% higher than where the biggest U.S. jeweler traded just over a month ago. The deal values Tiffany, which was founded in 1837 with its first store in downtown Manhattan, at $16.2 billion once group debts are included. The deal is expected to close in the middle of next year
"Tiffany has been focused on executing on our key strategic priorities to drive sustainable long-term growth. This transaction, which occurs at a time of internal transformation for our legendary brand, will provide further support, resources and momentum for those priorities as we evolve towards becoming The Next Generation Luxury Jeweler," said Tiffany CEO Alessandro Bogliolo. "As part of the LVMH group, Tiffany will reach new heights, capitalizing on its remarkable internal expertise, unparalleled craftsmanship and strong cultural values."
Tiffany's shares were rising 6.06% to $133.12 in trading Monday. LVMH shares, meanwhile, were up 1.22% higher on the Euronext exchange in Paris.
Tiffany said last month that it would "carefully review" LVMH's maiden proposal, which was first offered at $120 per share, in order to determine "the course of action it believes is in the best interests of the Company and its shareholders".
Analysts have noted that more than half of Tiffany's sales come from outside the U.S., providing LVMH with both a doorway into the domestic luxury market while supporting the group's growth in key markets such as Europe and China.
"We believe that a potential acquisition of Tiffany by LVMH makes strong strategic logic," said KeyBank Capital analyst Edward Yruma, who expected a transaction in the $125 to $130 per share range. "Continuing consolidation in luxury makes sense given the shift to e-comm, importance of the Chinese market (we believe one-third of sales, across all geographies) and likely synergies."