LVMH May Acquire Ralph Lauren in High-Fashion Merger
Luxury mega-brand LVMH is considering merging with Ralph Lauren in a move that could define retail M&As in 2022. Here are the latest details.
Luxury goods conglomerate LVMH (OTC:LVMUY) wants to make Ralph Lauren (RL) its first fashion acquisition of the year. If the deal proceeds, LVMH and Ralph Lauren could pave the way for retail sector M&As (mergers and acquisitions) in 2022.
Here’s what we know about the potential LVMH merger with Ralph Lauren, including whether the acquisition will go through.
Is LVMH really thinking about acquiring Ralph Lauren?
Sources have come forward to share that luxury fashion giant LVMH has held multiple meetings with Ralph Lauren over the last few years. LVMH reportedly held the meetings to explore a potential acquisition of the publicly traded fashion company.
Will LVMH proceed with a Ralph Lauren merger?
The conglomerate’s most recent acquisitions, Off White and Buly 1803, both occurred in the latter half of 2021. Ralph Lauren would likely be the largest acquisition for the company since LVMH bought Tiffany & Co. for $131.5 million in January 2021 or Christian Dior for $13.1 billion in April 2017.
Neither LVMH nor Ralph Lauren have commented on the acquisition rumors. However, Ralph Lauren—the founder of the eponymous company—is 82 years old as of Feb. 23 and is reportedly contemplating a succession plan after five-and-a-half decades in business.
Despite the fact that LVMH is a French company that has historically focused on European brands, its long-sought-after purchase of American company Tiffany & Co. has fared well, even amid a turbulent pandemic. This could signal another acquisition in the American market, with Ralph Lauren being a potential target.
Triangle Capital LLC co-founder Richard Kestenbaum said about the deal, "Ralph Lauren is a big company but LVMH can easily handle the size since it does more than 10 times the revenue of Ralph Lauren. LVMH has also demonstrated the unique skill of maintaining the luxury level of its owned brands without cheapening their market position to generate short-term gains."
What could happen to RL stock if LVMH acquires it?
LVMH trades on the OTC (over-the-counter) markets. Since the stock doesn’t trade on a major U.S. exchange, it’s possible that an acquisition wouldn’t impact RL stock, which trades on the NYSE. LVMH company Christian Dior continues to retain its American depository receipts (OTC:CHDRY).
Granted, Dior’s $116.61 billion market capitalization soars above Ralph Lauren’s $9.19 billion market cap, but the latter company’s valuation is still sizable.
RL stock is up 22.36 percent since Jan. 25 on positive earnings and, now, a potentially lucrative deal that could solidify Ralph Lauren past its founder-led era.
In comparison, LVMUY stock has fluctuated so far in 2022, although its long-term growth is more impressive (15.71 percent and 276.67 percent in the last year and five years, respectively).
What could the LVMH and Ralph Lauren merger mean for retail M&As?
Large acquisitions in the consumer retail space have declined in the last few years, with more focus going to smaller targets under $500 million. A lot of this has to do with growth strategy, but there are also regulatory concerns as the FTC revisits merger guidelines and works to minimize anti-competitive practices.
Despite this, 2022 is poised to be a big year for retail M&As, and an LVMH acquisition of Ralph Lauren could be a defining moment.