LVMH to take 100% control of Christian Dior in around €12, 5 billions deal
LVMH announced on Tuesday 25th that it will acquire the totality of the holding Christian Dior SE through a public offer on Christian Dior shares it does not currently hold. In total the deal is valued around $13 billions, almost €12,5bn.
The transaction will take place in two steps; in part one Groupe Arnault (the main shareholder of LVMH), which already holds 74,1% of Christian Dior, offered to buy the 25,9% of the company it doesn’t already own for €172 per share in cash and 0.192 Hermès International shares for each Christian Dior share, assuring some flexibility with regards to the terms of shareholders partecipation to the offer, for a total value of €260 per share. In part two, LVMH will acquire Christian Dior Couture for an enterprise value of €6.5 billions.
This deal takes Christian Dior SE off the market and transform it in a LVMH subsidiary, in order to simplify the structure and strenghten the Fashion & Leather Goods division of LVMH. LVMH already owns Parfums Christian Dior, and the deal would give it ownership of the Christian Dior haute couture, leather, men’s and women’s ready-to-wear, and shoe businesses (see story).
The acquisition is relevant because it regroups the entire Dior brand, which has always been independent from the rest of the group until today, within LVMH, and simplifies its management; at the same time, it reinforces Arnault family group’s control on LVMH increasing to 47 percent the stakes owned by the family.
As stated by Bernard Arnault on Tuesday,
This project represents an important milestone for the Group. The corresponding transactions will allow the simplification of the structures, long requested by the market, and the strengthening of LVMH’s Fashion & Leather Goods division thanks to the acquisition of Christian Dior Couture”. They illustrate the commitment of my family group and emphasize its confidence in the long-term perspectives of LVMH and its brands”.
Analysts reacted positively to news of the deal with Christian Dior; “The deal had long been expected by industry observers, and the increase of the share price after the announcement reflect the positive response of the market” –Luca Solca, head of luxury goods at Exane BNP Paribas, said.
The deal also evidences the growing importance of the two luxury poles LVMH and Kering, to the detriment of the other independent fashion brands, so the question is wether smaller firms will have place to compete or not. “It is reasonable to think that the industry will absorb this event and adjust the balance in the long term. Luxury is becoming more and more complex, with a growing complexity of the asset to manage: smaller brands won’t be able to be on top in every single aspect” – Luca Solca said answering our questions.
From a business strategic point of view, this acquisition will probably also have an impact on Dior’s digital performances, as the brand will be led by decisions taken by LVMH headquarter, whose controlled brands already perform well in our Digital Competitive Map 2017. On the contrary, Dior is still lagging behind both competitors and LVMH brands, showing poor rankings both on the Strategic Reach axis and on the Digital Customer experience Proficiency.