Latest LVMH luxury deal lifts stock on growth hopes

€2 billion takeover of Italian brand Loro Piana to accelerate growth in group’s fashion business

A Louis Vuitton store operated by LVMH in Shanghai, China. LVMH’s €2 billion takeover of Italian luxury cashmere clothing brand Loro Piana follows the €3.7 billion takeover of Italian jeweller Bulgari two years ago and the building of a 22.6 per cent stake in French luxury goods rival Hermes. Photograph: Tomohiro Ohsumi/Bloomberg

A Louis Vuitton store operated by LVMH in Shanghai, China. LVMH’s €2 billion takeover of Italian luxury cashmere clothing brand Loro Piana follows the €3.7 billion takeover of Italian jeweller Bulgari two years ago and the building of a 22.6 per cent stake in French luxury goods rival Hermes. Photograph: Tomohiro Ohsumi/Bloomberg

 

LVMH shares rose to a one-month high yesterday on investors’ hopes that its €2 billion takeover of Italian luxury cashmere clothing brand Loro Piana will accelerate growth at its fashion and leather goods business.

The deal, announced late on Monday, gives the world’s biggest luxury group by sales an exclusive brand specialising in rare wool and cashmere with a core margin in its luxury business of more than 20 per cent and 30 per cent of sales in Asia.

“Loro Piana has seen strong growth in the three years to 2012,” Barclays analysts wrote in a note to clients. “This should continue with LVMH offering some revenue synergies enabling more leather goods to be sold in the brand and enhance menswear.”

The latest purchase by LVMH of a high-end luxury group with a long heritage follows the €3.7 billion takeover of Italian jeweller Bulgari two years ago and the building of a 22.6 per cent stake in French luxury goods rival Hermes.

The deal gives Loro Piana an enterprise value of €2.7 billion, representing a multiple of 19.2 times estimated earnings before interest, tax, depreciation and amortisation, compared with 22 times for the Bulgari deal. – (Reuters)