The French fashion conglomerate said it was holding "preliminary discussions" regarding a "possible transaction" with Tiffany. "There can be no assurance that these discussions will result in any agreement," it added.
Tiffany ( TIF ) confirmed Monday in a statement that it is reviewing an all-cash proposal from LVMH to buy the company for $ 120 per share. That's a premium of more than 20% above the stock's closing price on Friday.
Such a deal would value Tiffany at about $ 14.5 billion, but analysts believe there is a good chance that Tiffany is on a sweeter offer.
Cowen analyst Oliver Chen predicts that LVMH will need to propose at least $ 1[ads1]60 per share to secure a deal. Other luxury companies – such as Richemont, which owns Cartier – may come up with competing bids, he said.
Tiffany shares skyrocketed more than 30% in the premarket market Monday to nearly $ 130 a share, suggesting that investors also expect a more lucrative offer. LVMH's stock barely popped in Paris.
"A takeover of Tiffany can make a lot of sense," analysts at Bernstein wrote in a research note. While it is one of the world's most famous luxury brands, analysts say it still has room to grow, especially in jewelry and watches.
Cowen & # 39; s Chen pointed to the company's strong brand as a "diamond and bridal authority," as well as its growth potential in China.
The agreement will increase LVMH's presence in the United States, which accounts for about a quarter of sales. And it will strengthen the French company's jewelry and watch layout, which includes European heritage brands such as Bulgari, Hublot and TAG Heuer. As of January, the jewelry and watch unit generated only 9% of total sales, according to a letter to shareholders.
LVMH is the world's largest luxury group. The company is home to 75 different brands, and it has been the top seller of advanced goods for several years, according to a Deloitte analysis published this year. Last year, the retail giant raised revenues of € 46.8 billion ($ 51.9 billion).
Tiffany has had a more complicated history. The company has long worked with a decline in sales, and in 2017 replaced the CEO after disappointing financial results. Since then, it has worked to reorganize its image to attract millennials – adding more products designed to appeal to young customers, rolling out more targeted marketing and rebuilding the historic New York City flagship store to revoke more customers.
In the company's latest income report in August it said global sales fell 3% during the first half of this year. But it also said it enjoyed "strong growth" in mainland China, where the slowing economy has put pressure on the wider luxury sector.
A Tiffany acquisition would be one of LVMH's splashiest deals to date. In 2017, the company acquired Christian Dior for $ 13 billion, and last year it snapped up the ritzy hotel chain Belmond for $ 2.6 billion.
– Julia Horowitz contributed to this report.
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