LVMH, Arnault to simplify Christian Dior business structure

Key Points
  • Arnault family company makes offer for Dior shares
  • New structure to boost LVMH earnings
A model walks the runway during the Christian Dior show at Paris Haute Couture Fashion Week at the Musée Rodin on July 7, 2014 in Paris, France.
Rindoff | Dufour | French Select | Getty Images

Luxury goods group LVMH and billionaire businessman Bernard Arnault announced on Tuesday a deal to simplify their relationship with Christian Dior by buying out its minority shareholders, a transaction aimed at boosting LVMH's earnings.

Arnault's family company said the deal was also aimed at reinforcing its fashion and leather goods division.

It would offer 172 euros in cash and 0.192 shares in Hermes, in which Arnault also has a stake, to buy each remaining Christian Dior share it does not currently hold.

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LVMH will also buy the Christian Dior couture brand from the Christian Dior holding company for an enterprise value of 6.5 billion euros ($7.1 billion).

Arnault has controlling stakes in both the current Dior structure and LVMH.

"The corresponding transactions will allow the simplification of the structures, long requested by the market, and the strengthening of LVMH's Fashion and Leather Goods division thanks to the acquisition of Christian Dior Couture, one of the most iconic brands worldwide," Bernard Arnault said in a statement.

The initial cash-and-Hermes-shares offer for Christian Dior would be followed by another secondary offer, valuing each Dior share at 260 euros - a premium of 14.7 percent compared to Dior's closing price of 226.85 euros on April 24.

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LVMH added in a statement that the overall deal would boost its earnings-per-share within the first year of its completion, with the transaction expected to be closed during the second half of 2017. ($1 = 0.9203 euros)

Speaking to CNBC Tuesday morning, LVMH CEO Bernard Arnault said that, "I'm not sure we're going to buy 100 percent" as his company had only made an offer to minority shareholders in Christian Dior, who make up roughly 26 percent of the brand. "We'll see if they come and respond to the offer," he added.

Explaining his reasoning behind the move, Arnault said, "The idea in doing that is giving them some liquidity."

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