French luxury group LVMH Moet Hennessy Louis Vuitton SA will take over Italy's Bulgari SpA in an 3.7 billion-euro all-share deal, paying a premium of almost 60 percent for the high-end watches and jewelry maker.
LVMH , the world's number-one luxury goods company, will add Bulgari to its stable of brands -- that includes Louis Vuitton handbags, Chaumet jewelry and Krug champagne -- in order to tap surging demand from emerging markets.
Bulgari has long been seen as a potential target after it embarked on major investments when its sales were falling in the 2009 spending slump.
LVMH will buy 50.4 percent of Bulgari, issuing 16.5 million shares in exchange for 152.5 million shares held by the Bulgari family, the companies said in statements on Monday.
The French company will launch a buyout offer for the rest of Bulgari shares at 12.25 euros ($17.14) a share. The shares closed at 7.59 percent on Friday and the offer carries a 59.4 percent premium over the average price of the last month.
At Friday's closing price of 111.55 euros for LVMH shares, and using 12.25 euros for the free-floating Bulgari shares, the deal values the jeweler at about 3.7 billion euros, according to Reuters calculations.
DEAL SEEN AS WELCOME
Bulgari, established in 1884, agreed to the takeover in order to reinforce, in accordance with its history, values, craftmanship and identity, the long-term development of the Bulgari Group, it said.
Under the deal, the Bulgari family will become the second-biggest family shareholder in LVMH.
The Bulgari family will name two representatives to the LVMH board. Bulgari Chief Executive Francesco Trapani will join LVMH's executive committee and take on management of LVMH's watches and jewelry activities in the second half of the year.
We expect the investors' community to welcome this deal given the operational improvements possible at Bulgari, a French broker said.
This should be a catalyst for possible targets in the sector. As such, we would (see...) that as a positive for Burberry Group Plc notably.
Trapani told Reuters last summer that his family had no plans to relinquish control of the group. We have not had any (takeover) proposal in our life, he said.
LVMH raised its stake in handbag maker Hermes to more than 20 percent in December. LVMH Chief Executive Bernard Arnault told Reuters in January he was not seeking control of Hermes.
(Additional reporting by Nigel Tutt and by Astrid Wendlandt and James Regan in Paris, Editing by Will Waterman and Sophie Walker)