Sophia Loren was a fan, so was Ingrid Bergman, so is Keira Knightley — and now Bernard Arnault has splashed out on Bulgari.
The French luxury goods tycoon bought the Italian jeweller yesterday for €4.3 billion, a deal perhaps even more eye-catching than the 18-carat emerald Bulgari brooch surrounded by diamonds that Elizabeth Taylor wore to her (first) wedding to Richard Burton in 1964.
It almost certainly presages a showdown with Cartier for preeminence in the global marketplace for the finest in diamond rings. Indeed, a source at LVMH, Mr Arnault’s luxury goods conglomerate, said: “With Bulgari, we are going to become a real challenger for Cartier.” The battle will be given an extra edge because Richemont, the Swiss owner of the French brand, was one of those that had cast envious eyes in Bulgari’s direction before yesterday’s announcement.
LVMH said that it had agreed to buy a controlling stake in the Rome-based company from its founding family in a share swap and added that it would make a cash offer for minority shares, which involved a premium of almost 60 per cent.
Industry insiders broadly welcomed the deal, even if there were concerns about the price being paid. Analysts at Natixis, the French bank, said that Bulgari was an “asset of great quality” that would almost double the size of LVMH’s watch and jewellery division, which accounted for less than 5 per cent of the group’s sales last year and “cruelly lacks critical mass”. LVMH, the owner of such brands as Louis Vuitton and Moët & Chandon champagne, generated sufficient cash to “absorb perfectly” the payout of up to €1.79 billion (£1.54 billion) to minority shareholders, Natixis said.
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The transaction enabled Mr Arnault to present a more amicable face after months of sniping sparked by his raid on Hermès, the French silk scarf and handbag maker, and after ten days of publicity surrounding the dismissal of John Galliano as head designer of Christian Dior, one of Mr Arnault’s star brands. The Briton was removed amid allegations of making antiSemitic remarks.
Mr Arnault was at pains yesterday to emphasise his harmonious relations with Paolo and Nicola Bulgari, the chairman and vice-chairman of the jeweller and grandsons of Sotirio Voulgaris, the Greek jeweller who founded the business in 1884. “We immediately understood each other and agreed on the way we would work together,” he said, in what appeared to be a implicit swipe at Hermès’ founding family, who reacted with fury when he took a 20.2 per cent stake in their company.
The Bulgaris will remain in charge of the brand and will take two places on LVMH’s board. Francesco Trapani, Bulgari’s chief executive who is also a member of the founding family, will sit on LVMH’s executive committee and will head the group’s watch and jewellery division.
Under the deal, LVMH will issue 16.5 million new shares in exchange for the 152.5 million Bulgari shares held at present by the Bulgari family, who own 50.43 per cent of the jeweller. The transaction will leave the Bulgaris as LVMH’s second-biggest shareholder, with a 3.5 per cent stake.
The public offer to minority investors of €12.25 a share represents a 59.4 per cent premium over the average price of the past month.
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The announcement comes with the luxury goods industry in general, and jewellery in particular, enjoying a sharp rise in sales, which are being pulled by emerging markets. Bulgari reported a 21 per cent increase in quarterly revenue in January, to take annual sales over the €1 billion mark. LVMH’s watch division, which includes brands such as TAG Heuer, registered a 29 per cent rise in sales last year to €985 million.
The Italian jeweller has long been regarded as a prime target in an industry where independent brands are increasingly rare. It has also long been a favourite of the rich and famous. In Burton’s words: “I introduced Liz to beer and she introduced me to Bulgari.”