France's LVMH, the world's biggest luxury group will take over Bulgari in a deal which values the Italian jeweller at €3.7 billion.
The offer, which priced Bulgari's shares at a 60 per cent premium to its average level over the last month, could herald the return of consolidation in the luxury market, which bounced back from the 2009 slump much faster than analysts expected.
Founded by billionaire Bernard Arnault, LVMH is built solely on acquisitions. Its brands now include Louis Vuitton handbags, Chaumet and Fred jewellery, Celine and Kenzo fashion, Hennessy cognac and Moet & Chandon champagne.
Bulgari had long been seen as a potential target having weakened its finances by embarking on big store investments when its sales were falling. There was regular speculation Switzerland's Swatch Group could take it over.
The transaction comes after LVMH built up a 20.2 per cent stake in smaller rival Hermes which, like Bulgari, is family controlled. That move prompted Hermes to fight back by creating a controlling family holding within the group to block LVMH's advance.
LVMH will buy 50.4 per cent of Bulgari, issuing 16.5 million shares in exchange for 152.5 million shares held by the Bulgari family, the companies said in statements today.
The French group also will launch a buyout offer for the rest of Bulgari shares at €12.25 a share. The shares closed at €7.59 on Friday and the offer carries a 59.4 per cent premium over the average price of the last month.
The deal values the jeweller at about €3.7 billion based on Friday's closing price of €111.55 for LVMH shares and using 12.25 euros for the free-floating Bulgari shares.
Bulgari, established in 1884, agreed to the takeover "in order to reinforce, in accordance with its history, values, craftmanship and identity, the long-term development of the Bulgari group", the company said.
Under the deal, the Bulgari family will become the second-biggest family shareholder in LVMH. Chief executive Bernard Arnault's Groupe Arnault holds 47.6 per cent of LVMH.
The Bulgari family will name two representatives to the LVMH board. Bulgari chief executive Francesco Trapani will join LVMH's executive committee and take on management of LVMH's watches and jewellery activities in the second half of the year.
Reuters