Arnault bags Bulgari for expensive 3.7 bln euros
By Pierre Briançon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
LONDON — In the last few years Bulgari has stood out as the luxury goods industry’s most famous officially-not-for-sale takeover target. The Italian jeweller and watchmaker is tightly controlled by a family who kept protesting, as recently as last year, that it wasn’t about to relinquish control. But money talks, and it looks like Bernard Arnault found a number that couldn’t be refused.
By offering a 60-odd percent premium for Bulgari, in a deal worth a total of 3.7 billion euros, Arnault’s LVMH luxury empire is adding an expensive thoroughbred to a stable of brands that includes Louis Vuitton, fashion houses like Givenchy, Moet champagne and Tag Heuer watches. The deal still values Bulgari at an eye-watering 20 times EBITDA and almost 40 times earnings — twice as much as LVMH itself. That’s also about the same as über-pricey Hermes <HRMS.PA>, the exclusive leather goods maker, in which LVMH acquired a 20 percent hostile stake last year.
Little is said about LVMH/Bulgari synergies, other than vague hopes that the combination will “capture additional opportunities for growth”. But Arnault has not thrown all caution to the wind. He has hedged his bets by paying for the family’s 50.4 percent stake in LVMH shares, in a deal that will see the Bulgari-Trapani family take a little over 3 percent of LVMH, and two seats on the board.
Furthermore, current Bulgari chief executive Francesco Trapani will eventually head LVMH’s watches and luxury division, which will double in size and make LVMH a serious player in the field.
LVMH is on course to launch a cash offer for the rest of Bulgari, which would amount to some 1.8 billion euros. But assuming all Bulgari minority shareholders take the offer — it’s hard to see why they wouldn’t — it would only take LVMH’s debt to a paltry 0.8 times EBITDA.
In some ways, the French tycoon in effect has just done his most expensive hiring. The main justification for the swift and generous deal, however, may simply be that in the luxury world, opportunities to bag attractive targets are few and far between. Bernard Arnault has shown, once again, that he knows when to pounce — and how.