Tiffany Gets Hitched In Paris

Parisian luxury goods retailer LVMH Moët Hennessy Louis Vuitton (OTCMKTS: LVMUY) agreed Monday to acquire New York-based iconic jeweler Tiffany & Co (NYSE: TIF) for around US$16.2bn.

LVMH said that its US$135 per share cash purchase of Tiffany is aimed at transforming its watches and jewelry division, in large part by expanding its footprint in the U.S. market.

Alessandro Bogliolo, Tiffany’s CEO, said that the transaction, which occurs at a time of internal transformation, “will provide further support, resources, and momentum for those priorities as we evolve towards becoming The Next Generation Luxury Jeweler.”

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While the deal, which is expected to close in the middle of 2020, has been greenlit by the boards of directors of both companies, it remains subject to approval by Tiffany’s shareholders, as well as regulators.

Meanwhile, it appears the tie-up may already be facing certain legal hurdles after corporate law firm Johnson Fistel reportedly launched an investigation into whether Tiffany’s board failed to satisfy its fiduciary responsibilities to shareholders, including whether it adequately pursued alternatives to the acquisition and whether it obtained the best possible price for its stock.

For their part, shareholders seemed uplifted, with Monday’s news of the merger having sent Tiffany’s shares skyward. In the mid-morning trading activity, the stock was up nearly 6% to US$132.93, according to the IBKR Trader Workstation.

In fact, the equity value of the more than 180-year-old firm had soared following its October 28 notice that LVMH had submitted an unsolicited buyout offer of US$120 per share in cash. Tiffany’s shares had jettisoned about 74.8% on the announcement from its most recent 52-week low set in late December.

Year-to-date, Tiffany’s stock remains up close to 65.5%.

Stronger Bonds

The company’s bondholders also seemed pleased, especially amid a recent receding of U.S. interest rates, which has been fueled by ongoing U.S.-China trade tensions, as well as the Federal Reserve’s commitment to a more dovish monetary policy path as global growth concerns increase.

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DISCLOSURE: AUTHOR SECURITY HOLDING: NO POSITIONS

The author does not hold any positions in the financial instruments referenced in the materials provided.

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