Tiffany & Co. has asked luxury conglomerate LVMH to raise its $14.5 billion acquisition offer, arguing that it significantly undervalues the U.S. jewelry chain, Reuters reports, citing unnamed sources. Last week, it became known that LVMH Moët Hennessy Louis Vuitton is seeking to add the iconic U.S. jeweler to its portfolio of upscale brands. The French company sent Tiffany officials a letter in the past couple of weeks outlining an all-cash takeover bid of about $120 a share, according to people familiar with the matter. That would value Tiffany at close to $14.5 billion.
Tiffany’s board reportedly decided that LVMH’s $120-per-share, all-cash bid was too low to become the basis for negotiations, sources told Reuters, also saying that LVMH remains engaged and is considering a new offer. Reuters writes that the exact numbers being discussed were not forthcoming, though sources have previously said Tiffany’s board considered a price reflecting $140 per share, which its shares reached last year, as key to reaching a deal.
In 2011, LVMH purchased Bulgari for 3.7 billion euros ($5.2 billion) to its give its jewelry business a shot in the arm and broaden its exposure to emerging markets. Watch and jewelry sales now represent 9% of LVMH's sales and 7% of its earnings. Bulgari is performing well; 2018 watch and jewelry sales rose by 12%, with profits jumping 38%, as JCK's Rob Bates points out in his analysis of the proposed deal, "Why Tiffany Should Tell LVMH 'No Thanks'." As he writes, "LVMH has signaled that while it wants Tiffany, it’s not ready to break the bank for it. A source told the New York Post that the company isn’t likely to increase its offer by more than $5 a share, which would be less than its current stock price. 'They feel they do not need the asset,' said the source." And neither does Tiffany's, "one of the best performing retailers in the world," really need LVMH said Bates, concluding "[Tiffany's] doesn’t need to be another scalp in a billionaire’s trophy case."