LVMH to take over Bulgari in share deal
French luxury group set to take control of Italian family owned jeweller in all-share deal
French luxury group LVMH, famous for its silk scarves, handbags and champagne, is to take control of the Italian family owned jewellery maker Bulgari at a time when the luxury market is booming again.
The Bulgari family has decided to tender its 50.43% stake in a share swap that will make it the second-biggest family shareholder in LVMH. The all-share deal brings together Bulgari watches and jewellery with LVMH's TAG Heuer, Zenith and Hublot brands. The world's largest luxury group, which owns 50 brands ranging from Christian Dior perfume to Louis Vuitton bags and Dom Pérignon, toasted a record 2010 recently.
The deal values Bulgari at €3.7bn (£3.18bn), a 60% uplift on Friday's close of €2.3bn.
Evolution Securities analyst Simon Hales said: "Financially then, the deal looks uninspiring for LVMH, but strategically it is an excellent move, bulking LVMH up in watches and jewelry, one of the fastest-growing areas of luxury. With the luxury industry in strong recovery mode, the financials will fall into place."
The watches and jewellery division is the fastest-growing of LVMH's main business groups, but remains the company's smallest, with €985m in revenues, less than 5% of LVMH's total. Bulgari, founded in 1884 by Sotirio Bulgari, makes nearly half of its revenues from jewellery, and a fifth from watch sales.
Bulgari's chief executive Francesco Trapani will join LVMH's executive committee and head up the merged watches and jewellery operations from the second half of 2011. Philippe Pascal, the current head of the division, is to be given a new role. The Bulgari family will be able to appoint two representatives to the LVMH board, while Paolo and Nicola Bulgari remain chairman and vice-chairman of Bulgari respectively.
Under the deal, hammered out over the weekend and announced by both companies on Monday, LVMH will issue 16.5m new shares in exchange for the 152.5m Bulgari shares held by the Bulgari family and the French firm will submit a public offer of €12.25 a share for the stock held by minority shareholders.
It has also emerged that Prada, the Italian family-owned fashion house known for its Miu Miu bags, is gearing up for a stock market flotation in Hong Kong, rather than Italy, because Asia is its fastest-growing region.
Higher percentage of revenue comes developing countries. The influence factors behind the consumer behavior could be very interesting.
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