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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.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Brent Crude Oil Approaches $70 Per Barrel on Friday

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Nigerian Oil Approaches $70 Per Barrel Following OPEC+ Production Cuts Extension

Brent crude oil, against which Nigerian oil is priced, rose to $69 on Friday at 3:55 pm Nigerian time.

Oil price jumped after OPEC and allies, known as OPEC plus, agreed to role-over crude oil production cuts to further reduce global oil supplies and artificially sustain oil price in a move experts said could stoke inflationary pressure.

Brent crude oil rose from $63.86 per barrel on Wednesday to $69 per barrel on Friday as energy investors became more optimistic about the oil outlook.

While certain experts are worried that U.S crude oil production will eventually hurt OPEC strategy once the economy fully opens, few experts are saying production in the world’s largest economy won’t hit pre-pandemic highs.

According to Vicki Hollub, the CEO of Occidental, U.S oil production may not return to pre-pandemic levels given a shift in corporates’ value.

“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”

Hollub believes corporate organisations will focus on optimizing present operations and facilities, rather than seeking growth at all costs. She, however, noted that oil prices rebounded faster than expected, largely due to China, India and United States’ growing consumption.

The recovery looks more V-shaped than we had originally thought it would be,” she said. Occidental previous projection had oil production recovering to pre-pandemic levels by the middle of 2022. The CEO Now believes demand will return by the end of this year or the first few months of 2022.

I do believe we’re headed for a much healthier supply and demand environment” she said.

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Crude Oil

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

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Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.

OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.

Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”

Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.

Experts have started predicting $75 a barrel by April.

“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”

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Gold

Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin

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Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges

Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.

The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.

The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.

We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.

Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.

Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.

In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.

The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.

 

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