French billionaire Bernard Arnault who runs luxury group Moet Hennessy Louis Vuitton (LVMH) fully acquires the Christian Dior brand after a strategic two-pronged business deal valued at $13 billion in total.
The two-part deal started when Groupe Arnault bought Christian Dior's minority investors' shares and shed some of its holdings to its rival company, Hermes International. The deal resulted in Bernard owning Parfums Christian Dior after buying 25.9 percent of the brand, which is valued at 260 euros of $282 per share.
Bernard completes the takeover by buying Christian Dior Couture for 6.5 billion euros. In a statement, he says, "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." Both boards from Christian Dior and LVMH were in favor of the deal.
While the change in ownership simplifies some transactions, like unifying Parfums Christian Dior and Christian Dior Couture, The New York Times reports that "The company called Christian Dior, which owns the brand’s couture business, will continue to exist and will own 41 percent of the share capital in LVMH, plus 56.8 percent of voting rights, making it the conglomerate’s controlling shareholder."
Luca Solca, the head of luxury goods at Exane BNP Paribas, tells Business of Fashion in a statement, "It adds a strong brand to the LVMH portfolio at a reasonable valuation and on an accretive basis. It [also] reduces the risk of LVMH potentially buying trophy assets at the expense of ROIC [return on invested capital] dilution."
Christian Dior and LVMH through Bernard had been part of a complicated holding structure after Bernard bought Boussac in 1984. The textile group owned the Parisian fashion house that was under a bankruptcy protection at the time. Bernard had also bought Berluti, Givenchy, and Loro Piana.
Currently, the Arnault family owns 47 percent stake in LVMH. LVMH is doing well in the luxury market despite the currency fluctuations and conflicts. It had a 15 percent increase in its first-quarter sales. Meanwhile, Christian Dior has reportedly doubled its revenue in the past five years, with a 24 percent per year profit increase.
LVMH expects to smooth out the deal by the end of May to start its internal restructuring.