Monday was quite an exciting day in the markets, with a number of major acquisition announcements catching the attention of investors and traders alike. One of these was regarding a major jewelry brand, Tiffany & Co (NYSE: TIF), whose shares jumped by over 30% when it announced that it received an unsolicited offer to be bought out by the owners of Louis Vuitton.
While rumors surrounding a possible offer were circulating as early as this weekend, Tiffany & Co only recently confirmed that it received the proposal from Louis Vuitton’s billionaire CEO Bernard Arnault. The offer would see the company pay $120 per share in cash for each share of Tiffany, although management responded in a statement saying that they are not in any discussions at present although they are reviewing the proposal.
Under such an offer, Tiffany would be valued at around $14.5 billion. While this is around a 30% premium in comparison to how much the company was worth before the news announcement sent the stock surging, analysts actually expect the company to hold out for a better offer.
Oliver Chen, an analyst at Cowen, went on to say that he expects Louis Vuitton would need to make an offer closer to $160 per share before it can secure the deal. Instead, he argues that other luxury companies could make their own competing bids in an effort to steal Tiffany away from Louis Vuitton. “Based on our analysis, LVMH has ample financial capacity for a deal and we also expect many strategic and financial synergies given margin expansion, product extension, and global growth opportunities at Tiffany,” wrote Chen according to MarketWatch.
Tiffany’s CEO, Alessandro Bogliolo, has made a push to expand into China as the company’s annual revenue figures have been seeing lackluster growth over the past few years. After the departure of the company’s previous CEO two years ago due to activist investor pressure, Tiffany’s management has struggled to change things up, which includes offering a new jewelry line for men.
However, the unexpected offer from Louis Vuitton would give the company plenty of room to collaborate with the luxury-brand and pursue additional growth opportunities. While it’s likely that Tiffany’s management will try to get a better offer out of the luxury brand, it would be a good idea for the company to take on a takeover offer sooner or later.
Shares of Tiffany & Co surged by 31.6% in response to the news, with shares now trading at $129.7 per share. The last time the stock was trading this high was in June 2018, where shares were selling at $134 per share. If Tiffany ends up surpassing this previous high in the weeks to come, it would make a new all-time high in the company’s long history on the NYSE.
Tiffany & Co Company Profile
Tiffany is a monobrand jeweler with a 180-year history. It is vertically integrated, with around 60% of jewellery produced internally. Tiffany is present in over 20 countries globally, with over 300 own stores. Its biggest market is its home market, the U.S.; however, Europe and Asia-Pacific have shown the strongest growth in recent years. Engagement jewellery contributes 26% of sales, the remainder being designer jewellery and other collections. – Warrior Trading News
