Op-Ed | Could LVMH Buy Richemont?



So now we know.

In January, Bernard Arnault sang the praises of Cartier owner Cie Financiere Richemont SA. He also quipped that if its chairman Johann Rupert wanted “support to maintain his independence, I’ll be there.” It was an odd thing to say — and had luxury watchers wondering what he had in mind.

On Tuesday, we got the answer. Bloomberg Businessweek reported that Arnault had taken a personal equity stake in Richemont.

It’s unclear exactly how many shares the LVMH chairman and chief executive officer has acquired. Bloomberg News described the holding as small and just one of many similar stakes that Arnault intended to own only as an investment. Both companies declined to comment.

But Richemont rose as much as 4 percent on renewed speculation that Arnault has his sights on the luxury conglomerate, which also owns Van Cleef & Arpels.

Acquiring Richemont would catapult LVMH into a completely different stratosphere to the rest of the luxury industry. In jewellery, it would combine Richemont’s Cartier and Van Cleef with LVMH’s Tiffany and Bulgari, creating a so called “hard luxury” powerhouse. Add in Louis Vuitton, the world’s biggest luxury brand, and sister Dior, and Arnault would be even more dominant.

And he could afford it too. Assuming the standard 30 percent premium, the target would be valued at about 111 billion Swiss francs ($124 billion). At a probably more realistic 50 percent premium, the potential price would be closer to 130 billion Swiss francs.

Even for LVMH, which has a market value of about $400 billion, paying in cash would be a stretch. But it could use a mixture of cash and shares. And Kering SA, which had looked like the better partner for Richemont, is busy turning around Gucci and integrating several acquisitions.

There may be competition concerns in some markets about an LVMH Richemont tie-up. But the main hurdle would be Rupert.

He holds about 10 percent of Richemont’s equity and 51 percent of the voting rights. What’s more, he has consistently insisted the company is not for sale. In fact, he said in 2023 that he decided against a deal with Kering two years earlier. And he has a strong hand to resist any overtures from Arnault.

Shares in Richemont are up about a quarter this year, while LVMH stock is flat — evidence that amid an uncertain luxury market, some investors prefer exposure to jewellery over leather goods.

Typically in tough times, “it bags” outperform watches, bangles and earrings. But prices of handbags have soared over the past few years. This makes the likes of Van Cleef necklaces and Cartier Love bracelets better value for money than purses. What’s more, as the cost of jewellery hasn’t risen so sharply, there is a deeper reservoir of potential price increases to tap over the next few years.

As at LVMH, where Arnault’s children are in the business, there will eventually be questions of who succeeds Rupert.

He has answered these — in part — with the appointment of Nicolas Bos, the head of Van Cleef, as Richemont’s new CEO from the start of this month. Rupert has handed over some management responsibilities to Bos, but remains as executive chairman. At 53, Bos could remain as CEO for some time, before eventually succeeding Rupert as chairman. Rupert has said that his son Anton will not take an executive role, but that may not preclude him from becoming non-executive chairman.

If Arnault has taken the stake in Richemont as simply an investment, then it’s a shrewd one. But if the so-called Wolf in Cashmere is licking his lips at the prospect of a deal, he will need the cooperation of the Kingmaker in Cartier.

By Andrea Felsted



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