Is the price cut by 3% worth the long-term game between the two giants?

Text | Tang Jieya

Edit | Shang Wenduo

In the early morning of October 29, according to the Financial Times, people familiar with the matter revealed that the world’s largest marriage in the luxury goods industry will be settled, and the French luxury empire LVMH will With US$131.50/share the “wedding gift” welcomes the American jewelry brand Tiffany back Home, put an end to the “long dating period” caused by the epidemic, political goals, and group interests. Tiffany will pay a dividend of $0.58 per share to shareholders.

Tiffany’s stock price opened on the 27th at 122.92 US dollars, a single-day increase of 4.94%, and closed at 128.88 US dollars; on the 28th, it continued to rise by 0.83%, reaching a 7-month peak of 130.85 US dollars, closing at 129.95 US dollars, and the current valuation is about 157.7 One hundred million U.S. dollars.

After repeated games, the purchase price finally dropped.

Compared with the previous price of $135/share, this peace agreement means that LVMH’s billionaire founder Bernard Arnault will save approximately $425 million from the original price, a drop of less than 3 %. Despite questioning Tiffany’s business and prospects, Kuai acquired LV President Arnault did not want to give up the acquisition, but to strive for lower prices.

But after several setbacks, some analysts believe that the price cut is not ideal. Jefferies analyst Flavio Cereda said: “If the news is true, the magnitude of the price adjustment will be strange.”

Maybe Tiffany’s strategic value is more attractive to LVMH.With this transaction, LVMH can expand the scale of hard luxury businesses such as watches and jewelry. This type of “hard luxury goods” only accounted for 8% of LVMH’s sales in 2019, 6.5% of operating profits, and 20% of sales costs. After the acquisition of Tiffany, LVMH may be able to reduce costs and expand its ambitions in the US jewelry market.

The current luxury goods industry is experiencing a cold winter. Although LVMH’s third-quarter sales were stronger than expected, with the second round of rectification in Europe and the closure of non-essential businesses in France and Germany in the next few days, the industry may recover. Faced with danger, holding a group for warmth can be a rescue.