LVMH bags jeweller Bulgari in $ 5.2 b deal

Thursday, 10 March 2011 00:01 - - {{hitsCtrl.values.hits}}

Reuters: French luxury group LVMH is buying Italian peer Bulgari for 3.7 billion euros ($5.2 billion), adding lustre to its jewellery business and broadening its exposure to emerging markets.

The offer, at a 60 per cent premium to Bulgari’s average share price over the past month, could herald the return of consolidation in the luxury market, which bounced back from the 2009 slump much faster than analysts expected. Bulgari will benefit from world No. 1 LVMH’s global retail network, improve margins through cost-sharing and help the owner of Louis Vuitton handbags close the gap with bigger watch and jewellery companies Richemont and Swatch.

Analysts said the high price was justified by the savings.

“The high price is probably explained by the fact that there were rival suitors,” said fund manager Gerard Moulin from Delubas Asset Management in Paris.

Rival bidders included the Richemont group and PPR, sources close to the groups told Reuters on Monday. Both groups declined to comment.

The total value of the deal, including 600 million euros of convertible bonds, was 4.3 billion. It will be paid for with 1.9 billion euros of new LVMH shares and 2.4 billion cash to buy out minority shareholders, financed half with debt and half with LVMH’s available cash.

Spearheaded by Arnault, LVMH was built on acquisitions and its brands also include Chaumet and Fred jewellery, Celine and Kenzo fashion, Hennessy cognac and Moet & Chandon champagne.

“Bulgari is one of the best known jewellery brands in the world, with lots of potential to grow on the back of LVMH’s global distribution reach and financial muscle,” Bernstein luxury analyst Luca Solca said.