Article / 04 October 2016 at 13:37 GMT

French LVMH shares spike after €640m German swoop

  • LVMH shares up after acquisition of Rimowa was announced
  • German luggage manufacturer enables LVMh to get closer to Samsonite
  • Quality is even more in focus for Rimowa than luxury
  • Arnault jr. will become Co-CEO

LVMH
Off for a road trip? Probably not. Arnault jr. (left), sr. (right) and Dieter Morszeck, 
grandson of Rimowa's founder (middle) carrying some luggage. Photo: LVMH
 

By Clemens Bomsdorf


Germany is not really known for luxurious products aside from the car industry. At least not as much as France or Italy, where the likes of Prada, Gucci, Louis Vuitton and Christian Dior originate from.

But a few German companies exist that combine design, very high quality and performance in a manner that makes them clearly seen as belonging to the luxury segment. Watchmaker A. Lange & Söhne is one of them, Montblanc with its famous pencils another and so is camera maker Leica.

LVMH share over the last two days (click to enlarge)
LVMH since 3 October 2016
Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more

Not to forget Rimowa, the renowned luggage manufacturer. The Cologne-based company has become the latest – and so far only German - acquisition target of LVMH, the French Louis Vuitton Moet Hennessy group that owns plenty of international luxury brands, among others Gucci, Louis Vuitton and Christian Dior. 

“Germany is recognised all over the world for the vitality of its family businesses and for the quality of their products. I am glad that LVMH will now have an opportunity to be part of this thanks to Rimowa,” Bernard Arnault, Chairman, CEO and main shareholder of LVMH, said in a statement. His son Alexandre, who is only in his twenties, will join Rimowa as Co-CEO.

Rimowa can well be seen as the cheaper alternative to Louis Vuitton luggage and it also comes AS more understated. Those knowing the brand are aware that its products come with a hefty price tag, but which is far from the Louis Vuitton level and secondly can be seen as being derived rather from quality than from the brand name. Rimowa is the luggage of choice for many affluent travellers and is also liked for its being almost unbreakable.

Hence, this acquisition could send two signals for the future of LVMH.

  • It can be seen as a move to add to the luxury brands mainly standing for conspicuous consumption and those that are also seen as having everyday products to offer. That would be a step exactly opposite to the one German carmaker Volkswagen with its luxury divisions Audi and Porsche did when buying Italian sports car maker Lamborghini. Here it shall also be noted that it brings LVMH closer to Samsonite, which has a much larger market share. 

  • Also the crowning of his son as Co-CEO means the younger generation is preparing for playing a more important role in Arnault’s stock listed empire. 

The LVMH-Rimowa transaction is subject to the approval of the competition authorities and due for completion in January 2017. Dieter Morszeck, grandson of Rimowa’s founder, has decided to divest 80% of the shares of the company to the value of €640 million. Part of this money will go into a foundation.

Rimowa revenue for 2016 is expected to exceed €400 million, according to both companies involved in the deal. That is less than 1.5% of LVMH’s total 2015 revenues of almost €36 billion. However, as 70 brands make up the LVMH universe, Rimowa is not much smaller than the average one. Read this summer 2015 piece by Peter Garnry on the industry for insights into the market.

LVMH monthly chart (click to enlarge)
LVMH monthly chart
Source: Saxo Bank

— Edited by Martin O'Rourke

Clemens Bomsdorf is a consultant editor at Saxo Bank
 
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