Two big acquisitions moved forward Monday.
Louis Vuitton owner LVMH on Monday agreed to buy Tiffany for $16.2 billion in its biggest acquisition yet, as the French luxury goods maker bets it can restore the U.S. jeweler’s luster by investing in stores and new collections.
The $135-per-share cash deal will boost LVMH’s smallest business, the jewelry and watch division that is already home to Bulgari and Tag Heuer, help it expand in one of the fastest-growing industry sections and grow its U.S. presence.
The agreement would value Tiffany at $16.2 billion, according to CNN Business.
The company will have challenges to overcome, too, as spending patterns shift and Chinese shoppers retreat from the United States to buy more at home, one of the side effects of a Beijing-Washington trade war that has weighed on New York-based Tiffany.
And the U.S. jeweler still is in turnaround mode as it tries to rejuvenate its image and lure shoppers online.
But the New York-based brand, founded in 1837 and known for its signature robin’s egg blue boxes and the Audrey Hepburn-starring movie, still has a resonance as the go-to purveyor of engagement rings only a handful of rivals can match, such as Richemont-owned Cartier.
“It’s an American icon, which is now going to become a little French, too,” LVMH’s Chairman and CEO Arnault told Reuters.
LVMH finance chief Jean-Jacques Guiony told analysts that taking Tiffany off the stock market and investing in its products would help the company deliver its revival plan.
“We expect to bring Tiffany time and capital, which are two things that are not too easy to get when you report quarterly to the stock market,” he said, adding LVMH would build on popular new Tiffany lines such as its more modern “T” jewelry ranges and saw potential for the brand in accessories like scarves.
The purchase crowns a string of acquisitions through which Arnault, France’s richest man, has built up his conglomerate, including fashion brands such as Christian Dior, wineries, and beauty retailers such as Sephora.
Also on Monday, Charles Schwab agreed to acquire TD Ameritrade Holding in an all-stock deal valued at $26 billion, creating a brokerage giant in a market that has been ravaged by price wars.
The acquisition will shake up the retail brokerage industry, creating a company with $5 trillion in assets under management and putting smaller rivals under pressure to scout for tie-ups.
The discount brokerage business is under pressure from new, more nimble start-ups that are gaining market share by eliminating commissions on stock trades.
Last month, Schwab became the first major brokerage to eliminate commissions, a move followed by others including Fidelity Investments, E*Trade Financial and TD Ameritrade.
“In a low, or no fees world ... the pressure will be on other financial services rivals to try to keep up, or to gain further scale themselves,” Bankrate.com senior economic analyst Mark Hamrick said.
While the deal could give Schwab an edge in the price war, analysts and antitrust experts said the merger would face tough regulatory scrutiny, although it could still be approved.
“The industry will continue to have large players and we won’t think it will derail a deal,” said Stephen Biggar, director of financial institutions research at Argus Research.
ARTICLE CONTINUES BELOW ADVERTISEMENT
The combined company will have about 65 percent to 70 percent of investment account assets, according to a note from KBW last week.
As part of the deal, expected to close in the second half of 2020, Ameritrade stockholders will get 1.0837 Schwab shares for every share held, or $52.23 based on Schwab’s Friday close.
TD Ameritrade, whose CEO Tim Hockey was due to step down in February, suspended its CEO search and named Chief Financial Officer Stephen Boyle as interim head to lead the company’s proposed integration.
CNBC had reported that the combined company was expected to be led by Schwab’s chief executive officer, Walt Bettinger.