European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Tiffany (TIF US) - LVMH: Happily Ever After

Event-Driven

On 26 October the European Commission cleared <a href="https://www.smartkarma.com/entities/lvmh-moet-hennessy-louis-vui" target="_blank" data-smartkarma-citation="entities:21072:1" rel="noopener">Lvmh Moet Hennessy Louis Vuitton (MC FP)</a> proposed acquisition of <a href="https://www.smartkarma.com/entities/tiffany-co" target="_blank" data-smartkarma-citation="entities:14729:1" rel="noopener">Tiffany &amp; Co (TIF US)</a>, the U.S. jeweler said in an October 26 filing.
The <a href="https://www.wsj.com/articles/tiffany-lvmh-near-agreement-on-new-deal-terms-11603899275" target="_blank" rel="noopener">WSJ has reported today</a> that Tiffany is nearing an agreement to accept a lower price in its takeover by LVMH.
<ul>
<li>The companies have come to a preliminary agreement on new deal terms that would call for LVMH to pay $131.50, down from the prior $135.</li>
</ul>
I believe that the update shows a strong rebound from the lows brought upon by the Covid pandemic. Moreover, pessimism about Tiffany may be past the corner as the turnaround plan may finally be bearing fruit.
By applying a 26x to Capital IQ consensus estimate of $4.91 (EPS at FY 31 March 2023), I arrive at my price target of $127.66 per share of Tiffany. I believe that Tiffany should trade in line with LVMH's and Richemont's P/E.
The last months have witnessed a high stakes negotiation with threats of pulling the deal off and lawsuits, but Bernard Arnault likes to win, and he will presumably save $420 mn from the final tag. LVMH wants to grow in hard luxury and Tiffany represents a unique opportunity that will benefit from LVMH's savoir-faire. I believe that downside is limited and Tiffany's valuation is well supported by its future prospects. Gross spread is 1.2%. Recommendation is LONG TIF.

On 26 October the European Commission cleared Lvmh Moet Hennessy Louis Vuitton (MC FP) proposed acquisition of Tiffany &amp; Co (TIF US), the U.S. jeweler said in an October 26 filing.
The WSJ has reported today that Tiffany is nearing an agreement to accept a lower price in its takeover by LVMH.

The companies have come to a preliminary agreement on new deal terms that would call for LVMH to pay $131.50, down from the prior $135.

I believe that the update shows a strong rebound from the lows brought upon by the Covid pandemic. Moreover, pessimism about Tiffany may be past the corner as the turnaround plan may finally be bearing fruit.
By applying a 26x to Capital IQ consensus estimate of $4.91 (EPS at FY 31 March 2023), I arrive at my price target of $127.66 per share of Tiffany. I believe that Tiffany should trade in line with LVMH's and Richemont's P/E.
The last months have witnessed a high stakes negotiation with threats of pulling the deal off and lawsuits, but Bernard Arnault likes to win, and he will presumably save $420 mn from the final tag. LVMH wants to grow in hard luxury and Tiffany represents a unique opportunity that will benefit from LVMH's savoir-faire. I believe that downside is limited and Tiffany's valuation is well supported by its future prospects. Gross spread is 1.2%. Recommendation is LONG TIF.

Tiffany - LVMH: Preliminary Agreement at a Lower Price