LVMH buys BVLGARI (updated)

France’s LVMH will take over Bulgari in a deal which values the Italian jeweler at 3.7 billion euros and gives the No.1 luxury group more clout in the sector and bigger exposure to emerging markets. The Bvlgari family gave up 51% of the company in favour of LVMH, becoming the second largest shareholder in LVMH after majority shareholder and founder Bernard Arnault.

Paolo and Nicolo Bulgari will have two seats in the LVMH board and will maintain their President and Vice President of the Board positions in Bulgari. Bulgari’s CEO Francesco Trapani will enter the executive board of LVMH and will run the entire pole of luxury watches and jewellery companies of the group.

For LVMH, adding Bulgari will allow the French luxury group to leverage its global retail network and boost margins by sharing costs. Bulgari has been underperforming since the debut of the crisis, with a rather dull creative direction, slow international expansion and scoring behind its major direct competitor Cartier, owned by Richemont Group. Analysts have long blamed the sluggishness of the company’s old style management to adapt to the fast changing business environment.

UPDATE (March 8th 2011)

In an interview to Italian media, Francesco Trapani insists ”we did not sell Bvlgari to LVMH… we invested in LVMH” ”I have been trying for years to find an Italian partner”…  ”It has been long time that I have been trying to create an Italian hard luxury pole, with several other top Italian brands, this way consolidating resources and markets. The choice of LVMH was mainly because they understood this concept”. He also added that LVMH’s ”hard luxury” business (refers to jewellery/watches) will double in the following half decade.