Latest LVMH luxury deal lifts stock on growth hopes

PARIS, July 9 Tue Jul 9, 2013 5:10am EDT

PARIS, July 9 (Reuters) - LVMH shares rose to a one-month high on Tuesday on investors' hopes that its 2 billion euro ($2.6 billion) takeover of Italian luxury cashmere clothing brand Loro Piana will accelerate growth at its fashion and leather goods business.

The deal, announced late on Monday, gives the world's biggest luxury group by sales an exclusive brand specialising in rare wool and cashmere with a core margin in its luxury business of more than 20 percent and 30 percent of sales in Asia.

"Loro Piana has seen strong growth in the three years to 2012," Barclays analysts wrote in a note to clients. "This should continue with LVMH offering some revenue synergies enabling more leather goods to be sold in the brand and enhance menswear."

Shares in LVMH were 2.3 percent higher at 131.65 euros by 0907 GMT, among the top gainers on a 0.7 percent firmer French blue-chip CAC 40 index, for a two-week rise of some 10 percent.

The latest purchase by LVMH of a high-end luxury group with a long heritage follows the 3.7 billion euro takeover of Italian jeweller Bulgari two years ago and the building of a 22.6 percent stake in French luxury goods rival Hermes.

The deal gives Loro Piana an enterprise value of 2.7 billion euros, representing a multiple of 19.2 times estimated earnings before interest, tax, depreciation and amortisation (EBITDA), compared with 22 times for the Bulgari deal.

Elsewhere in the luxury industry, Swatch's recent $1 billion deal to buy the high-end jewellery arm of Harry Winston implied an enterprise value-to-EBITDA ratio of 13.5.

Citi luxury goods analyst Thomas Chauvet said the Loro Piana deal enabled LVMH to acquire "a niche, ultra high-end apparel brand with a lot of heritage, a sound management team and some strategic sourcing competencies" at a "reasonable price".

Loro Piana has had average annual sales growth of 17 percent over the past three years, which analysts said would help make up for slower growth at other LVMH brands such as Louis Vuitton.

The development of Louis Vuitton, the world's biggest luxury brand in terms of sales, remains the key focus for LVMH's stock performance, however, the Barclays analysts said. (Reporting by Astrid Wendlandt and James Regan; Editing by Erica Billingham)

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