LVMH to take full control of Christian Dior Couture

On April 25, 2017, LVMH Moët Hennessy Louis Vuitton SE announced plans to fold Christian Dior Couture into LVMH in a two-part transaction worth about 12.1 billion euros or $13.2 billion.

Christian Dior SE, a company listed on Euronext Paris, is 74 percent owned (directly and indirectly) by Bernard Arnault’s Groupe Arnault with the remaining 26 percent free-floating. Christian Dior SE, in turn, owns 41 percent of LVMH and 100 percent of Christian Dior Couture SE.

In the first part of the transaction, Groupe Arnault offered to buy the 26 percent of Christian Dior SE it does not already own for a combination of cash and shares of Hermès International it owns for about 5.6 billion euros. In the second part of the transaction, LVMH offered to buy Christian Dior Couture SE for 6.5 billion euros (approximately $7.1 billion).

The transaction simplifies the ownership of the Christian Dior brand. While the brand’s apparel, accessory, and jewelry businesses were under Christian Dior Couture, the perfume and cosmetic businesses were under LVMH. With the transaction, Christian Dior becomes the second largest fashion brand in the LVMH portfolio after Louis Vuitton and ahead of Fendi.

French textile manufacturer Marcel Boussac was Christian Dior’s original financial investor when the house was launched in 1946. In 1978, the Marcel Boussac group filed for bankruptcy and the assets were acquired by the holding company Agache-Willot. Three years later, Agache-Willot also filed for bankruptcy. With help from the investment bank Lazard Frères, Bernard Arnault was able to raise the required capital with a group of investors and by the end of 1984 he took over Agache-Willot. He then divested most of the assets while focusing on Christian Dior.

In 1988, Christian Dior, through a subsidiary, took a 32 percent capital stake in LVMH. The shares were offered as part of a capital increase in a private placement. By 1990, following a protracted legal battle with the Vuitton family, Arnault took over LVMH. In 1995, the couture line of Christian Dior is transferred to a wholly-owned subsidiary with the name Christian Dior Couture.

Revenues of Christian Dior Couture have grown over the 20-year period of 1996 to 2016 from 187 million to 1,854 million euros. For the 12-month period ending March 31, 2017, Christian Dior Couture recorded revenues of 2 billion euros and EBITDA of 418 million euros. Thus, the Christian Dior Couture SE enterprise value of 6.5 billion euros represents 15.6 times EBITDA.

Sources: Bloomberg, WWD, Business of Fashion, Deluxe: How Luxury Lost Its Luster

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