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After terminating its partnership with Swatch, Tiffany & Co could become a target for takeover
After terminating its partnership with Swatch, Tiffany & Co could become a target for takeover

Tiffany may become takeover target

Could Tiffany & Co become a takeover target after its falling out with Swatch Group?
The respected financial news website, has reported that Tiffany & Co could become a takeover target after its partnership with Swatch Group was recently terminated.

According to the report, with the breakup of the Swatch deal removing an obstacle for a potential takeover, Tiffany may now lure interest from luxury retailers LVMH Moet Hennessy Louis Vuitton SA (MC) and Cie. Financiere Richemont SA.

Jon Cox, a Zurich-based analyst for Kepler Capital Markets told Bloomberg the previous venture between Swatch and Tiffany was seen as an obstacle for a takeover bid of Tiffany.

“If someone like a Richemont, another watch company, wanted to take over Tiffany’s, that would have caused complications [because of the Swatch partnership]” Cox said.

As previously reported by Jeweller, Swatch Group recently cancelled a profit-sharing alliance formed in December 2007 to develop, produce and sell Tiffany branded watches.

According to data compiled by Bloomberg, Tiffany could command a 40 per cent premium in the event of an acquisition.

Tiffany revenues are predicted to increase more than 30 per cent in the next two years, with the company increasing its sales outside the United States. According to Merriman Capital Inc. and Caris & Co, Tiffany anticipates opening more stores in Asia and Europe.

Since the beginning of the global financial crisis, Tiffany has employed a number of strategies to help it maintain sales during tough times. At a time when jewellers all over the world were losing money Tiffany excelled.

While the company’s net sales declined slightly in 2009, according to Idex Tiffany’s profit margins were four-times the industry average and the company has stayed in good health ever since.

In an interview with Bloomberg, Matt Arnold, an analyst for St. Louis-based Edward Jones & Co said Tiffany’s “forays overseas have been stunning. Global brand strength is what makes this thing (Tiffany takeover) special.”

Further data compiled by Bloomberg show that Tiffany’s shares increased 166 per cent to USD $67.47 ($69.61) yesterday since the 18-month recession ended in June 2009, giving Tiffany a market value of USD $8.6 billion ($8.87 billion).

Tiffany’s shares have grown post-recession after the company opened new stores in Asia and Europe and sales are projected to climb to record highs this year and next. Bloomberg analysts estimate that sales will (for the first time) surpass USD $4 billion ($4.13 billion) in the 12 months ending January 2013.  

Bloomberg’s analysis suggests that Tiffany’s equity could see a takeover bid between USD $11.2 billion ($11.56 billion) and USD $12.7 ($13.1 billion) billion.

Tiffany’s brand awareness in overseas markets could prove to be an important selling point according to Agnes Cromback, the head of Tiffany’s French unit. In a recent interview with Bloomberg, Cromback said Tiffany would soon generate the majority of its sales outside the United States as it opens more stores in Europe and China.

More reading:
Bloomberg report: Tiffany worth $12 billion in takeover
Swatch ends partnership with Tiffany
Tiffany reveals recession-busting strategy
Tiffany upbeat after first-quarter results

Arthur J. Gallagher & Co

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