As jewel heists go, this was the Big One – the richest and shiniest ever. Bernard Arnault, the wealthiest man in Europe, and boss of the world's largest luxury goods empire, LVMH, yesterday smashed and grabbed his way to control of the officially "unsaleable" Italian jewellery company, Bulgari, bauble-maker to the stars. It was, of course, a perfectly legal raid, which could cost LVMH up to €4bn in shares and cash for a company which has been family-owned since 1884.
Mr Arnault, 61, has had a long rivalry with the second largest luxury goods empire in the world – PPR, built by another French self-made billionaire, François Pinault. The capture of Bulgari signals war on a glittering new front against Richemont, the jewel-laden, third largest global luxury goods empire, based in Switzerland and assembled by South African tycoon, Johann Rupert, 60.
The commercial clout of LVMH – with more than 2,500 shops around the world – will be used to challenge Richemont, and especially its leading jewellery brand, Cartier. This will also be a clash in styles between the urbane, arts-loving socialite Mr Arnault and the reclusive Mr Rupert.
LVMH (Louis-Vuitton-Moet-Hennessy) already has many of the greatest names in handbags (Louis-Vuitton), fashion (Dior, Givenchy); booze (Moet) and perfume (Guerlain). It was, until yesterday, relatively light on jewellery and watches, apart from TAG Heuer and Hublot.
Although Bulgari is the smallest of the world's leading jewellery companies, it is one of the most glamorous. Past clients include Elizabeth Taylor.
The company was started in Rome in 1884 by Greek immigrant Sotirios Bulgari. It has 260 shops worldwide. Adding Bulgari to the portfolio will increase LVMH's interest in the jewellery and watch sector by 70 per cent, but leave the company trailing behind Richemont, the undisputed world leader in top-class bling.
Maybe not for long. Market commentators, who were taken by surprise by LVMH's shopping expedition, predicted Mr Arnault would be looking for new jewellery and watch-making acquisitions soon.
They also predicted the deal could set off an avalanche of wider takeovers in a luxury goods sector. Sales to China, Russia and India are booming and Goldman Sachs predicted this week that "600 million new consumers are set to enter the [luxury goods] market by 2025".
LVMH's coup in capturing Bulgari – frequently said "not to be for sale at any price" – interrupted a run of bad publicity for the Paris-based company. One of the Arnault empire's "founder members", the fashion house Christian Dior, was trailed through the mud last week by the "I-love-Hitler" comments of its British chief designer, John Galliano (since fired). In recent months, LVMH has been in an acrimonious takeover battle with the posh, French handbag and scarf maker, Hermes. LVMH acquired 20 per cent of Hermes shares late last year, despite frequent warnings by the smaller, independent company that such interest was regarded as "hostile". Mr Arnault and LVMH have insisted they are merely courting Hermes in search of "partnerships" and "synergies".
The acquisition of the loss-making Bulgari seems to have been consensual. After secret negotiations concluded at the weekend, it was announced that LVMH would take all the family-owned majority stake in the Italian company. LVMH would swap 16.5 million of its own shares for the 152.5 million shares owned by the Bulgari family. This valued the 51 per cent family stake at €1.84bn. LVMH is also to offer €12.25 a share to other holders of Bulgari equity – which could bring the total cost of the deal to €3.7bn to €4bn. The Bulgari family will name two representatives to the LVMH board and the Bulgari chief executive, Francesco Trapani, will become head of LVMH's watches and jewellery division.
Mr Arnault started with a small family building company in the north of France in 1971. His early wheeling and dealing, to break into the luxury goods market, was often criticised. He has long since become one of the French great and good.
He fought, and lost, a vicious legal and commercial battle for control of Gucci with Pinault a decade ago. That apart, he has had few failures.
Sources within LVMH said the purchase of Bulgari was part of a change of strategy. Rather than focus on the struggle with its nearest rival, Pinault's PPR, LVMH has decided to take on Richement – and especially its Cartier jewellery brand. By using LVMH's commercial strength, Mr Arnault will challenge Richemont, Cartier and Johann Rupert head to head. The handbag war with Gucci is over. The bauble war has just been joined.
How the empires measure up
A. Lange and Söhne
Baume et Mercier
James Purdey and Sons
Manufacture Robert Dubuis S.A
Ma Azzedine Alaia
Van Cleef & Arpels
Also own 50 per cent of Polo Ralph Lauren Watch and Jewelry Company
Moët & Chandon
Domaine Chandon California
Sir Jason Twist
Parfums Christian Dior
Le Bon Marché
The bulgari brand
* Exclusive jewellers Bulgari began life as a family business, founded in 1884 by Sotirio Bulgari, a Greek-born silversmith who had moved to Rome. His sons, Giorgio and Constantio, worked alongside him, opening a flagship store (which still exists today and inspires the décor of Bulgari stores worldwide) on the Via Condotti in 1905.
* The next generation looked beyond the refined French goldsmith tradition in which their father worked, referencing the Italian Renaissance. Their pieces suited perfectly the newly emergent jet-set and movie star crowd, whose patronage cemented Bulgari's reputation for luxury and elegance.
* After expanding internationally in the Seventies to New York, Geneva, Monte Carlo and Paris, the Bulgari group moved into watchmaking and, eventually, perfumes in the Nineties, before listing on the Milan Stock Exchange in 1995. This listing received a boost from the following year's launch of bags, scarves and eyewear, which continue to sell well as status pieces
* The Bulgari group finally opened a hotel in Milan in 2004, paving the way for other brands that have done so since, such as Missoni and Moschino. Its name is synonymous with exclusivity the world over, with its signature marbled logo and hushed, hallowed stores conjuring an old-school luxury that is rarely found in these days of internet shopping and bargain hunting.
Johann Rupert, 60 - Estimated fortune: $2.3bn
The chief executive of the Swiss company Richemont since 1988. Famous in South Africa, he's been described as the country's "very own Warren Buffett", while the Financial Times gave him the nickname "Rupert the Bear" for predicting the world economic crisis in 2006. The son of the late business tycoon Anton Rupert, he co-owns two of South Africa's best-known vineyards and one of the country's most exclusive golf clubs. He helped create the Laureus Sport for Good Foundation, which funds projects using sport to tackle social issues. Chancellor of the University of Stellenbosch in South Africa, he abandoned his degree for merchant banking in New York. He lives with his wife Gaynor and his three children near Stellenbosch.
Bernard Arnault, 61 - Estimated fortune $23bn
Chief executive of LVMH Moët-Hennessy Louis Vuitton, Mr Arnault began with a small family public works company in 1971. By several strokes of fortune (some say genius; others say ruthlessness) he found himself owning Christian Dior and then, in 1987, being invited to "save" the recently merged handbags and luxury drinks company LVMH. He has since, mostly by acquisitions, built the group to be the largest luxury goods company in the world. Mr Arnault has become part of the French political and art establishment. His plans for a futuristic LVMH foundation and museum in the Bois de Boulogne to house his large art collection were recently halted in mid-construction by a neighbours' revolt. He lives with his second wife, the Canadian pianist Hélène Mercier-Arnault.Reuse content