French luxury group LVMH Moët Hennessy Louis Vuitton is making a play for the iconic blue box, confirming Monday it has offered to buy Tiffany & Co. for $14.5 billion in cash, sending shares in the New York jeweler soaring.
The purchase would add another glittering household name to LVMH's plethora of upscale brands such as Christian Dior, Fendi and Givenchy, as well as watchmaker Tag Heuer. It would also give LVMH a much broader foothold in the United States and widen its offerings in jewelry.
Tiffany, which is trying to transform its brand to appeal to younger shoppers, could use a company with deep pockets to help expand its business. The New York-based luxury retail said Monday it was considering the offer for $120 a share, which is about $14.5 billion. The Wall Street Journal first reported on the offer over the weekend.
Tiffany shares jumped nearly 30% or $28.81, to $127.37 in early Monday trading, although LVMH cautioned in a brief statement that "there can be no assurance that these discussions will result in any agreement."
The offer comes as luxury goods companies have been wrestling with changing habits of shoppers who are increasingly buying online. They're also purchasing second-hand luxury items from.
In addition, luxury companies are facing fears of an economic slowdown in China, a key area of business growth the past decade, while they're already dealing with a slowdown in international tourism in the U.S.
Tiffany's was founded in 1837 by Connecticut jeweler Charles Lewis Tiffany and the brand name became world famous in the early 20th century under the artistic direction of his son Louis Comfort Tiffany.
Today's Tiiffany's, with about $4 billion in revenue, is famed for diamond and sterling silver jewelry packaged in boxes shaded a distinctive blue known as "1837 Blue" and sold at more than 250 stores in the U.S., Europe and Asia. Its Fifth Avenue flagship store at the corner of Manhattan's Fifth Avenue and 57th Street was made famous in the 1961 movie "Breakfast at Tiffany's" starring Audrey Hepburn.
Under its CEO, Alessandro Bogliolo, Tiffany is trying to appeal to younger shoppers with more modern takes on jewelry. Earlier this year, it launched a men's jewelry collection, and it's increasing its marketing to a more diverse customer base like same-sex couples. It's also been renovating its flagship store in Manhattan.
Still, Tiffany's U.S. sales have been stagnating as, who make up a substantial portion of luxury spending. The strong dollar has also made Tiffany products more expensive for consumers outside the U.S.
"We believe Tiffany has many characteristics that are difficult to replicate and represent competitive advantages," wrote Oliver Chen, luxury analyst at Cowen & Co., an investment research firm. He noted Tiffany's diamond polishing facilities and long-term relationships with diamond mines as well as its bridal expertise and long-term growth potential with China.
LVMH competes with the Kering Group, which owns Gucci and Saint Laurent, and Richemont SA, which owns Cartier.