LVMH increases stake in TOD’s by up to 10 percent

0

French luxury goods group LVMH will increase its stake in fashion company Tod’s to 10%, Tod’s said Thursday, in a move that sources describe as “friendly support” for the Italian struggling leather goods manufacturer.

Tod’s said in a statement that LVMH would purchase a 6.8% stake from Tod’s founder and chairman Diego Della Valle. LVMH, led by French billionaire Bernard Arnault, already owned a 3.2% stake in Tod’s.

“This transaction strengthens the 20-year friendship between the Arnault and Della Valle families,” Tod’s said in his statement.

A source close to the case said the French giant does not expect to increase its stakes any further for the time being. Diego Della Valle has served on LVMH’s board of directors since 2002.

The Italian luxury leather goods manufacturer outperformed most rivals as a result of the 2020 coronavirus pandemic. In January, sales had fallen by nearly a third last year, the fifth consecutive year of declining annual sales.

The group, known for its loafer shoes, launched a new strategy in late 2017 to renew its brand and attract younger consumers, but the health crisis has hampered its efforts. Earlier this month, Italian influencer Chiara Ferragni joined the board in a move that pushed stocks up sharply and was seen as an attempt to rejuvenate the image.

There has been recurring market speculation that Tod’s could be the target of a larger group takeover, although Della Valle, who has increased its stake in the company in recent years, has repeatedly denied this possibility.

“This could be an excellent reason to consider further opportunities that could be seized in the future,” Della Valle said Thursday of LVMH’s increase in importance, without elaborating.

LVMH, which has more than 70 brands after building an empire through a series of acquisitions, reported surging sales in the first quarter last week, exceeding market expectations and fueling hope that it can leave the health emergency squarely behind this year.

It is often rumored that the group is a predator, even though it just completed a $ 15.8 billion acquisition of US jeweler Tiffany and has said it aims to absorb that purchase for the time being. However, Jefferies analyst Flavio Cereda said in a note late Thursday that there could be speculation about a further increase in LVMH’s stake in Tod’s.

The agreed price for the purchase of LVMH’s share is EUR 33.10 per share, a discount of 10% on Tod’s share price. The shares of Tod closed at 35.3 euros on Thursday.

Following the transaction, which is expected to close on April 28, Della Valle will own 63.64% of Tod’s outstanding shares.

“We are very pleased to further strengthen this partnership,” LVMH chief Arnault said in the statement.

By Kanishka Singh