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Sunday, March 6, 2011

LVMH to Buy a Controlling Stake in Bulgari

Bernard Arnault

Bernard Arnault has done it again. While no one was watching the chairman and CEO of LVMH Moët Hennessy Louis Vuitton has captured another prize: Bulgari.

In a few hours the two companies will announce that LVMH will purchase a 51 percent share of the Italian luxury jewelry house, according to the Financial Times and other published reports. The purchase will come in the form of a share swap. A person close to the deal told the FT that as part of the deal, Francesco Trapani, Bulgari’s chief executive, will take a senior position in the LVMH group, while Bulgari family members will get board representation.

According to the report the Bulgari family is united in agreement for the sale. This is in contrast with LVMH’s 20-percent position in Hermès, the Parisian luxury house, which is still being talked about in luxury circles. This deal was done in late 2010 through a complex derivatives position without the knowledge of the heirs of the Hermès family, who own 70 percent of the fashion house. The family has publicly voiced its disapproval. 

Update, March 7, 2:35 a.m EST: LVMH just released its announcement of the acquisition with addition information. Upon completion of the share transfer process, LVMH said it will issue 16.5 million shares in exchange for the 152.5 million Bulgari shares currently held by the Bulgari family, who will become the second largest family shareholder of the LVMH Group. In compliance with the Italian Stock Exchange regulations, LVMH said it will submit a Public Purchase Offer at the price of €12.25 per share on the shares held by minority stockholders.

The statement further defines Bulgari executives’ positions in LVMH. Paolo and Nicola Bulgari will remain chairman and vice chairman of the Bulgari S.p.A. Board of Directors, respectively. The Bulgari family will have two representatives on the LVMH Board of Directors. Trapani will join the executive committee of LVMH and will assume, in the second half of 2011, the management of the LVMH enlarged watches and jewelry activities, which includes the brands TAG Heuer, Chaumet, Zenith, Hublot, Fred and De Beers. Philippe Pascal, the current head of jewelry and watch group, will remain on the LVMH executive committee and be given new responsibilities within the Group, the statement said.

“Our entrance into LVMH will allow Bulgari to reinforce its worldwide growth and to realize noteworthy synergies, in particular in the areas of purchasing and distribution,” Trapani said. “Bulgari and these brands will be able to invest and innovate even further to become the world leader in the high end segment.”

Arnault added: “We share the same culture in terms of respect for identity and roots of the brands, quest for excellence, creativity and innovation. As is the case with LVMH, the Bulgari family shareholders are directly involved in managing the company, they are entrepreneurs that know and excel in all aspects of the business, from the creation of the product to after sales service. It is for these reasons that we immediately understood each other and agreed on the way we would work together.”

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