LVMH’s Deal for Tiffany Is a Huge Win for World’s Richest Man

This article was originally written by Andrew Bary for Barron’s and published on January 31, 2023.

There is a reason that Bernard Arnault is the world’s richest person.

 The chairman, CEO and controlling shareholder of LVMH Moët Hennessy Louis Vuitton (ticker: LVMUY ), the world’s largest luxury-goods company, knows how to buy companies and integrate acquisitions. He also is a shrewd negotiator.

 Arnault was crowing on LVMH’s recent earnings conference call about the company’s contentious 2021 acquisition of Tiffany. He said Tiffany’s earnings had doubled since the roughly $16 billion purchase.

“Tiffany, for the first time will exceed the €1 billion [or about $1.08 billion] in profit from recurring. We were barely at half that when we acquired the business,” Arnault said, according to a transcript. “Everyone said to me, why are you buying this business at that price, it’s far too much. Well, if today the business were to be listed — well, we never know. But I mean it wasn’t perhaps managed in the most dynamic way. I won’t dwell on that at the time, but if it were listed today, probably worth twice as much.”

LVMH almost didn’t purchase Tiffany. It agreed to pay more than $16 billion for the famed U.S. jewelry retailer in late 2019 and then tried to back out of the deal in September 2020 when the pandemic had led to a sharp drop in Tiffany’s sales and revenue. LVMH cited actions by the French government for the move.

The companies then recut the deal. LVMH ultimately paid $131.50 a share for Tiffany, below the original price of $135.

 LVMH paid about 30 times Tiffany’s 2019 net income of about $550 million, but the current P/E appears to be about 15 times earnings based on Arnault’s statement that earnings have doubled.

 LVMH has excelled at acquisitions including the purchase of Sephora, the cosmetics retailer, in the late 1990s for little more than $200 million. It also scored with its $5 billion purchase of luxury jeweler Bulgari more than a decade ago.

Arnault, 73 years old, is worth about $190 billion, according to the latest Bloomberg tally, ahead of Elon Musk, who is No. 2 on the list at $170 billion.

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