LVMH to take over Christian Dior Couture for 6.5 billion euros

​ London - One of the biggest deals within the fashion industry is set to take place this year as luxury giant LVMH announced plans to buy fashion house Christian Dior for a 12.1 billion euros (10 billion pounds) and Christian Dior Couture for 6.5 billion euros (5.52 billion pounds).

The deal, announced Tuesday morning, sees the Arnault family making an offer on the publicly held Christian Dior shares it does not already own and regrouping the entire Dior brand within LVMH as part of its two-headed strategic plan to further solidify its luxury offering. The move sees LVMH, which currently owns Perfumes Christian Dior, buying the Christian Dior brand and its Haute Couture, women’s and men’s ready-to-wear lines, footwear and leather goods, uniting one of the most iconic fashion houses under one roof for the first time in decades.

LVMH to buy Christian Dior SA

Through Semyrhamis, a company held by the Arnault family, the group will file a simplified mixed public offer on Christian Dior shares it does not own, which are equal to 25.7 percent of the share capital. The primary offer sees the group offering 172 euros per share in cash and 0.192 Hermes International shares for each Christian Dior share, with the deal being completed by two secondary offers which will be cash-only and Hermes International shares only at 260 euros per Christian Dior share and 0.566 Hermes International shares per Christian Dior share respectively.

The public offer values each Christian Dior share at 260 euros, and represents a premium of 14.7 percent over Christian Dior closing share price as of April 24, 2017, as well as an 18.6 percent premium over the 1 month average share price. This offer values the remaining Christian Dior shares at 12.1 billion euros (10 billion pounds). Revenue at Christian Dior has doubled over the last five years, as profitability has soared during the same timeframe. For the last 12 months which ended March 31, Christian Dior reported revenue in excess of 2 billion euros, with an operating profit of 270 million euros.

“This project represents an important milestone for the Group. The corresponding transactions will allow the simplification of the structures, long requested by the market, and the strengthening of LVMH’s Fashion and Leather Goods division thanks to the acquisition of Christian Dior Couture, one of the most iconic brands worldwide,” said Bernard Arnault in a statement. “They illustrate the commitment of my family group and emphasize its confidence in the long-term perspectives of LVMH and its brands. I am delighted to announce this project today and thus continue and reinforce the development of LVMH in France and worldwide.”

The announcement led to an increase in LVMH shares on Tuesday morning, which rose 2.9 percent to 221 euros during early trading. The move sees LVMH merging the entire Christian Dior brand together, which could create great synergy between Christian Dior and Parfums Christian Dior, which is set to be be accretive to LVMH earnings per share once the deal is complete. The luxury conglomerate expects the filing of the proposed offer to be completed by the end of May 2017, after which the acceptance period of the offer would last three weeks.

“Reuniting Christian Dior Couture and Christian Dior Parfums, so one brand under one leadership, has to be a good thing for LVMH shareholders,” said Stephen Mitchell, head of strategy for global equities at Jupiter Asset Management, during a Bloomberg Radio interview. “It does clean up the corporate structure.” Couturier Christian Dior first founded his eponymous fashion house in 1946, thanks to support from businessman Marcel Boussac. He later expanded his namesake brand into fragrances, watches and accessories and began opening stores in New York, London and Tokyo. Iconic designers such as Pierre Cardin and Yves Saint Laurent also worked for the leading fashion house early in their careers, as Christian Dior himself passed away in 1957.

Photo: Christian Dior and Dior.com