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LVMH to Gain Control of Dior After $13 Billion Arnault Deal

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  • LVMH to Gain Control of Dior After $13 Billion Arnault Deal

French billionaire Bernard Arnault moved to consolidate control over Christian Dior for about 12.1 billion euros ($13.2 billion), folding the fashion house’s operations into the LVMH luxury empire in one of his biggest transactions.

The deal unites ownership of one of the most iconic fashion brands under one roof for the first time in decades, valuing Paris-based Christian Dior SE at 260 euros a share, according to a statement Tuesday. That’s 15 percent above the Monday closing price of Dior, which Arnault’s family already controls with a 74 percent stake.

The two-part transaction, which comes amid a China-led revival in the luxury-goods industry’s fortunes, simplifies a complicated ownership structure and crowns the career of the biggest consolidator in the business. Arnault, who has a net worth of $46.3 billion, took control of the parent companies of Dior and Louis Vuitton in the 1980s and later added brands ranging from fashion label Fendi to jeweler Bulgari and suitcase maker Rimowa.

In the latest deal, LVMH is taking over a fashion house whose voluminous “New Look” helped revive French haute couture in the postwar years and whose designers have ranged from Pierre Cardin to John Galliano, for 6.5 billion euros. LVMH, 47 percent controlled by the Arnault family, already owns Dior perfumes and beauty thanks to a 1960s-era transaction to raise capital for the then-troubled fashion brand.

‘Good Thing’

“Reuniting Christian Dior Couture and Christian Dior Parfums, so one brand under one leadership, has to be a good thing for LVMH shareholders,” Stephen Mitchell, head of strategy for global equities at Jupiter Asset Management, said in a Bloomberg Radio interview. “It does clean up the corporate structure.”

LVMH rose as much as 3.4 percent in early trading in Paris, while Dior gained as much as 13 percent.

Dior investors can choose payment in cash or stock of Hermes International, using shares in the rival Paris-based luxury company that the Arnault family received in 2014 after a controversial effort by LVMH to build a stake. The boards of Christian Dior and LVMH are unanimously in favor of the deals, and have appointed independent experts to review their terms, according to the statement.

Hermes Shares

Swapping the Hermes stock for Dior shares helps the Arnault family cash out of a profitable investment without paying taxes on a sale. LVMH surprised its rival in October 2010 by announcing it held 17.1 percent of the company. The move led the Hermes founding family to file a lawsuit and to form a holding company to protect its ownership. LVMH in 2014 ended the drama, distributing the shares to investors. Hermes shares have risen about 350 percent since the end of 2008, the year in which LVMH began buying derivatives on the stock.

“This is a good acquisition for LVMH in our view, given the strong brand of Christian Dior,” analysts at Barclays said in a note, adding that it’s a “good use of its balance sheet.”

Hermes was down as much as 6.2 percent in early trading. The transaction means millions of the LVMH rival’s shares that have been held by the Arnault family could soon hit the market. Investors will no longer see Hermes as a possible takeover target for Arnault now that he’s paring its stake, Bloomberg Intelligence analyst Deborah Aitken said.

LVMH, whose full name is LVMH Moet Hennessy Louis Vuitton SE, is paying about 15.6 times earnings before interest, tax, depreciation and amortization over the past year for Christian Dior Couture, which it will acquire for 6.5 billion euros under the second part of the plan announced Tuesday.

Galliano, Slimane

Dior, whose look has been refreshed in recent decades by the likes of Galliano, Raf Simons and Hedi Slimane, already works closely with LVMH. The fashion house’s watches, for example, use movements made by LVMH’s Zenith brand, and Arnault said cooperation would increase after the deals.

Bringing the two companies under the same umbrella will ease Dior’s access to financing for stores and marketing as well as making it easier to move talent between the perfume and fashion arms, Arnault said.

“This is an operation that shows our confidence in the French economy as well as in LVMH going forward,” Arnault said at a press conference. “It will allow us to increase the synergies that already exist between LVMH and Christian Dior Couture.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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