LVMH Moet Hennessy Louis Vuitton SE (LVMH) chairman and CEO Bernard Arnault moved to consolidate control over Christian Dior SE for about 12.1 billion euros (US$13.17 billion), folding the fashion house’s operations into the LVMH luxury empire in one of his biggest transactions.
The deal, which would unite ownership of one of the most iconic fashion brands under one roof for the first time in decades, values Paris-based Christian Dior at 260 euros per share, according to a statement yesterday.
That is 15 percent above the Monday closing price of Dior, which Arnault’s family already controls with a 74 percent stake.
Photo: Reuters
Under a series of planned transactions, LVMH would get Christian Dior Couture, which makes the Lady Dior handbag, made-to-measure gowns and men’s and women’s ready-to-wear fashions.
Arnault’s family also holds a 47 percent stake in publicly traded LVMH, which already owns Dior perfumes and beauty thanks to a 1960s-era deal to raise capital for the then-troubled fashion brand.
“Reuniting Christian Dior Couture and Christian Dior Parfums, so one brand under one leadership, has to be a good thing for LVMH shareholders,” said Stephen Mitchell, head of strategy for global equities at Jupiter Asset Management, in a Bloomberg Radio interview. “It does clean up the corporate structure.”
LVMH shares yesterday rose 3.2 percent in early trading in Paris, while Dior surged 13 percent.
Dior investors can choose payment in cash or stock of Hermes International, using shares in the rival Paris-based luxury company that the Arnault family received in 2014 after a controversial effort by LVMH to build a stake.
The boards of Christian Dior and LVMH are unanimously in favor of the deals and have appointed independent experts to review their terms, according to the statement.
Swapping the Hermes stock for Dior shares helps the Arnault family cash out of a profitable investment without paying taxes on a sale.
LVMH surprised its rival in October 2010 by announcing it held 17.1 percent of the company. The move led the Hermes founding family to file a lawsuit and to form a holding company to protect its ownership.
LVMH in 2014 ended the drama, distributing the shares to investors. Hermes shares have risen 351 percent since the end of 2008, the year in which LVMH began buying derivatives on the stock.
“This is a good acquisition for LVMH in our view, given the strong brand of Christian Dior,” Barclays analysts said in a note, adding that it its a “good use of its balance sheet.”
Hermes was down as much as 4 percent in early trading yesterday.
LVMH is paying about 15.6 times earnings before interest, tax, depreciation and amortization over the past year for Christian Dior Couture, which it is to acquire for 6.5 billion euros under the second part of the plan.
Designer Christian Dior founded the fashion house in 1946 with backing from businessman Marcel Boussac, later expanding into fragrances, watches and accessories and opening stores in New York, London and Tokyo. Designers Pierre Cardin and Yves Saint Laurent also worked for the house early in their careers. Dior died in 1957.
The deals “illustrate the commitment of my family group and emphasize its confidence in the long-term perspectives of LVMH and its brands,” Arnault said.
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