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Richemont to pounce on Tiffany & Co?
11 june 2005
Article by: Barry Sergeant© Moneyweb Holdings Limited, 1997-2005
If Swiss market commentator Armando Guglielmetti has his ducks in a row, Richemont, the luxury goods stock listed in Switzerland and Johannesburg, is going to sell its stake in British American Tobacco (BAT), and buy Tiffany & Co.
The market speculation, on which Richemont has no comment, has hit the market on a day when Richemont is trading at multi year records, just above 41 Swiss francs a unit, a level not seen since August 29, 2001. Richemont is also at multi-year highs in Johannesburg, trading around R22.40 a share.
Richemont is due to report annual results tomorrow; the average expectation from investment analysts suggests that figures will be excellent, to say the least.
Tiffany would cost lots: the stock’s current market capitalisation on the New York Stock Exchange is $4.7-bn. Richemont’s stake in BAT is worth £4.3-bn, after the company reported excellent first quarter results. Tiffany would be priced to go at around, say, $6-bn.
Market speculation that Richemont would be prepared to pounce on Tiffany follows last week’s news that Richemont had sold Hackett, seen by some observers as a “chronic” loss-maker. The sale was read as a possible signal of a change in strategy for Richemont, which has long been apparently unwilling to sell its non-core luxury brands.
Zuercher Kantonalbank, a Swiss securities firm, said the Hackett sale “fuels hopes that the company will make further positive steps to solely focus on its core business.” It was thought that Richemont could now look to sell clothing brand Dunhill and leather brand Lancel. Richemont’s “core brands” include the likes of Cartier, Jaeger-LeCoultre, Piaget, Baume & Mercier, Vacheron Constantin and Montblanc.
Richemont has often insisted that it intends retaining its BAT stake, but Tiffany could be a neat addition to the Richemont stable. The company was founded in 1837 when Charles Lewis Tiffany opened a store in downtown Manhattan; today Tiffany is a jeweler and specialty retailer, offering an extensive selection of fine jewellery (82% of net sales in fiscal 2004), as well as timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories. Today, more than 7 000 employees at 100 Tiffany stores and boutiques serve customers in the US and international markets.
As to tomorrow’s results, Richemont is set to report net profits for the year to March 31, 2004, of around €1-bn, against €320-m for the previous comparable period. Net profit on an adjusted basis, which gives a more realistic feel of how the underlying business performed, is likely up nearly 30% to €850-m, against €660-m.
EBIT (earnings before interest and tax) is seen rising nearly 70%, to €500-m, against €296-m previously. Richemont has already said that sales were €3.72-bn against €3.38-bn.
The BAT stake contributed the bulk of Richemont’s bottom line in fiscal 2004; of adjusted net group profits of €660-m, €238-m came from subsidiaries in the luxury goods business. Associates, mainly BAT, contributed €442-m. In cash terms, Richemont received dividends of €252-m from BAT.
Source: www.tiffany.com
Article by: Barry Sergeant
© Moneyweb Holdings Limited, 1997-2005
