LVMH Takes Over Italian Jeweler Bulgari in a $6 Billion Deal
The Bulgari family’s long quest to figure out the future of its 127-year-old jewelry and watch business ended last Thursday at a dinner overlooking the Roman skyline.
The leaders of the Bulgari clan — Paolo and Nicola Bulgari and their nephew Francesco Trapani — sat down with Bernard Arnault, the chairman and chief executive of LVMH Moët Hennessy Louis Vuitton, who had desired their company for years. The meeting was so important that Mr. Arnault, whose aggressive deal streak had stocked LVMH with 60 of the world’s most exclusive brands, even skipped part of Paris Fashion Week to attend.
Convinced that the LVMH chief would safeguard Bulgari’s identity and culture, the three decided to sell.
“You could feel that the vibes were very right,” Antonio Belloni, LVMH’s group managing director, who attended the dinner, said in an interview by phone. “It was by far the most decisive moment and crowned a mutual friendship between us and them.”
By Monday, LVMH announced that it would buy the family’s stake in Bulgari — and set up an eventual takeover of the entire jeweler — for 4.3 billion euros ($6 billion), including debt, in one of the biggest luxury deals in recent memory. It also raised the prospect of similar transactions, propelling shares higher in independent fashion houses like Burberry of Britain.
Under the terms of the transaction, the Bulgari family will swap each of its shares for LVMH stock, valuing its holdings at 12.25 euros each, a 61 percent premium to Friday’s closing price. LVMH will also pay minority shareholders in Bulgari 12.25 euros in cash for each of their shares.
The transaction will make the Bulgaris the second-largest group of family shareholders in LVMH, behind Mr. Arnault and his relatives. It will also elevate Mr. Trapani from the Italian company’s chief executive position to a new level, overseeing LVMH’s jewelry and watch businesses.
Perhaps more important, the sale provides Bulgari with a better platform for selling its million-dollar baubles in rapidly growing markets like China. The Italian company had never recovered from the global recession, a downturn that forced it to cut costs. Still, last year it posted a 15 percent increase in revenue, to 1 billion euros.
“They realize they need stronger managerial skills to take advantage of long-term growth, and they see LVMH as the best partner to bring them to the next level,” Davide Vimercati, an analyst at the Italian bank UniCredit, said of the Bulgaris.
The takeover, which will roughly double LVMH’s presence in the lucrative market for jewelry, is an important victory as the conglomerate battles with another hallowed name in high fashion, Hermès.
The clan that controls the French handbag maker has waged war with LVMH, arguing that a sale would erase the company’s essential identity. By comparison, the Bulgaris saw LVMH as critical to helping their company thrive.
“On the one hand, we get to keep our personality and independence,” Mr. Trapani of Bulgari said in an interview by phone. “On the other hand, we get to take advantage of their stronger organization.”
He added that, while he publicly disavowed the possibility of a sale as recently as last year, he had quietly worked behind the scenes with advisers at Credit Suisse to explore potential partnerships. Their first attempt — gathering a confederacy of Italian luxury companies — proved unsuccessful almost immediately, pushing Bulgari to look abroad.
While other international luxury conglomerates, including Financière Richemont of Switzerland and P.P.R. of France, have also been hunting for new targets, LVMH presented the right pitch of financial strength, international reach and respect for the family-ingrained culture.
With discussions starting just before Christmas, the two sides held frequent talks over how to structure a deal and how much LVMH would pay. The dinner on Thursday was the final step in the courtship.
By Friday, the two sides had shaken hands over an agreement in principle, leaving only the decidedly unglamorous legal work to be done. But when the final deal papers were signed, no one was in any condition to pop open a bottle of LVMH’s high-end Krug Champagne. It was 4 a.m. on Saturday.
Categories: Private Equity, Western Europe