LVMH to Take Control of Italy’s Bulgari

1:40 a.m. | Updated LVMH Moët Hennessy Louis Vuitton, the French luxury conglomerate, said Monday that it would take control of Italy’s Bulgari in an all-share deal, adding another high-end brand to its formidable stable in a deal worth 3.7 billion euros.

The Bulgari family has agreed to exchange its 51 percent controlling stake in the jeweler for 16.5 million LVMH shares, making it the second-largest family shareholder in the group. The family will also gain two seats on LVMH’s board, the company said.

“We found in Bernard Arnault and the group he has built all the elements that are required to guarantee the long-term future of Bulgari,” Paulo and Nicola Bulgari, chairman and vice chairman of the jeweler, said in a joint statement, referring to the head of LVMH.

Bulgari’s chief executive, Francesco Trapani, whom Mr. Arnault called “the driving force behind Bulgari’s development over the last 20 years,” will join LVMH’s executive committee, as well as lead the company’s expanded watches and jewelry business.

LVMH also announced a tender offer of 12.25 euros a share to acquire the remaining shares of Bulgari, a 61 percent premium over where they were trading before the announcement.

Bulgari’s shares closed on Friday at 7.59 euros on the Borsa Italiana, giving it a market value of about 2.29 billion euros ($3.22 billion).

With more than 60 brands — a burnished list that also includes Christian Dior, Fendi and Céline — LVMH is widely regarded as an extremely powerful force in fashion and luxury, offering items ranging from Louis Vuitton handbags to Dom Perignon champagne.

And it has benefited from a resurgence in the high-end consumer goods market, as revenue rose 19 percent last year, to more than 20 billion euros, while profit jumped 73 percent, to 3 billion euros.

Mr. Arnault has established a reputation as one of the luxury industry’s most aggressive buyers, with a massive appetite for striking deals. He has regularly dueled with rivals like PPR of France and Richemont of Switzerland over control of some of the world’s top brands.

In the 127-year-old Bulgari, LVMH will gain a major maker of jewelry and watches, one the company has kept its eye on for some time. The company reported about a billion euros in revenue last year, an increase of about 15 percent over the previous year, as sales rose rapidly in growing markets like China.

“As is the case with LVMH, the Bulgari family shareholders are directly involved in managing the company,” Mr. Arnault said. “They are entrepreneurs that know and excel in all aspects of the business.”

Bulgari draws the vast majority of its sales from Europe and Asia.

Mr. Trapani of Bulgari has said that he expects the company’s profit to improve this year, though he has remained cautious about economic uncertainty in Europe.

The peaceful negotiations between LVMH and the Bulgari family stand in stark contrast to LVMH’s battle with another hallowed name in French luxury, Hermès, whose controlling family has largely united in an effort to fend off its acquisitive rival.

LVMH amassed a 20 percent stake in Hermès, the maker of Kelly and Birkin bags and iconic colorful scarves, through equity swap derivatives. High-level LVMH executives, led by Mr. Arnault, say that they are not seeking to unnecessarily antagonize the management of Hermès. But they also suggest that they will be patient in waiting for Hermès family members to sell out.

Shaken by the stealthiness of LVMH’s approach and a belief that the larger company would devalue the Hermès brand, various members of the controlling Dumas family have sought ways to maintain their grip.

News of the Bulgari deal was first reported by The Financial Times online.

Chris V. Nicholson contributed reporting from Paris.