TIF Tiffany and Co

By Ben Dummett and Suzanne Kapner 

Tiffany & Co. has received a takeover approach from LVMH Moët Hennessy Louis Vuitton SE, which 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 last couple of weeks outlining an all-cash takeover bid of roughly $120 a share, according to people familiar with the matter.

The companies aren't in talks but Tiffany is expected to work quickly on a response, some of the people said. Even though the bid represents a premium of 30% or more above where Tiffany traded when it was made, according to one of the people, LVMH is expected to have to pay up if it wants to clinch the deal. New York-based Tiffany's stock closed at $98.55 Friday, giving it a market value of nearly $12 billion, and reached nearly $140 a share during the summer of 2018.

LVMH has a market value of EUR193 billion ($214 billion).

Bloomberg earlier reported on LVMH's interest in Tiffany.

Buying Tiffany would increase Paris-based LVMH's exposure to jewelry, one of the fastest-growing businesses in the luxury sector. The global market grew 7% and was worth about EUR18 billion in 2018, according to Bain & Co. Tiffany, with more than 300 stores globally, is one of the world's largest jewelers, along with Cartier and LVMH-owned Bulgari, but it has been unable to keep pace with European rivals.

Tiffany, which has about $4 billion in annual revenue, has struggled with lackluster sales growth for years. The 182-year-old brand has been trying to rebuild its business after ousting its chief executive two years ago amid pressure from an activist investor. The stock, which had slumped near $60 in 2016, has been hovering around $100 for much of the past year.

Under CEO Alessandro Bogliolo, the jeweler has pushed an expansion into China, with plans to open flagship stores in several major cities. The chain, which relies heavily on tourist spending in the U.S. market, has also been renovating its flagship New York store on Fifth Avenue.

It also has tried to broaden its appeal with marketing that includes more minorities and same-sex couples, added new products for younger shoppers and introduced a jewelry line for men.

But in recent quarters sales have slipped both in the U.S. and Asia. Excluding currency swings, comparable sales have declined from a year ago for two straight quarters. In August, executives cautioned that the protests in Hong Kong and a macroeconomic slowdown could dampen profits for the rest of the year.

Luxury companies have been pressured by fears of an economic slowdown in China, where shoppers account for roughly a third of all luxury-goods purchases world-wide. Escalating trade tensions have also played a part in waning consumer confidence in China.

Tiffany would be one of the biggest acquisitions yet by Bernard Arnault, LVMH's chief executive and controlling shareholder. Mr. Arnault paid EUR12 billion in 2017 to unite the storied fashion house Christian Dior with LVMH.

LVMH, which has roughly $50 billion in annual revenue, also relies on Chinese shoppers for a chunk of its sales. But the conglomerate is so large and has so many brands -- from Louis Vuitton to Dom Pérignon -- that it has fared better than Tiffany in recent years. Revenue jumped in its latest quarter, showing little impact from the Hong Kong protests or U.S.-China trade tensions.

LVMH could use its deep pockets to develop product lines where Tiffany is currently weak. In addition to Bulgari, LVMH owns luxury watchmakers Hublot and TAG Heuer.

"Tiffany has yet to express its full potential -- for example in design jewelry and watches," says Bernstein & Co. analyst Luca Solca.

The deal would significantly expand LVMH's presence in the U.S., giving it more exposure to U.S. dollar-denominated revenue and reducing foreign-exchange risk, Mr. Solca says.

Tiffany's Mr. Bogliolo is familiar with LVMH. He spent 16 years at Bulgari before LVMH took control of the company in 2011 and then served as North American operating chief at LVMH's Sephora unit for a little more than a year. Before joining Tiffany, he was CEO of Italian apparel company Diesel SpA.

--Matthew Dalton contributed to this article.

Write to Ben Dummett at ben.dummett@wsj.com and Suzanne Kapner at Suzanne.Kapner@wsj.com

(END) Dow Jones Newswires

October 27, 2019 12:50 ET (16:50 GMT)

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