LVMH's move on Tod's fuels turnaround, takeover expectations

MILAN (Reuters) -Shares in Tod’s hit a 16-month high on Friday on expectations that LVMH could help to relaunch the struggling Italian brand and eventually take it over after the French luxury goods giant’s decision to raise its stake in Tod’s.

Long seen as a takeover target, Tod’s has grappled with shrinking sales for the past five years and the pandemic has further hampered efforts to revive a brand that became famous in the 1990s for its gommino loafers but struggles to appeal to younger shoppers.

Tod’s said late on Thursday that LVMH would buy a 6.8% holding for 74.5 million euros ($89 million) from founder and Chairman Diego Della Valle, adding to a 3.2% stake which the group owns since Tod’s bourse listing in 2000.

Della Valle, who has been an LVMH director for the past two decades, said the strengthened partnership could be “an excellent reason to consider further opportunities to be taken in the future”.

Shares in Tod’s rose as much as 16%, before retreating to trade 8% up at 38.16 euros by 0802 GMT, their highest since early 2020.

They have rallied 23% over the past two weeks after Tod’s on April 9 appointed Instagram star and fashion influencer Chiara Ferragni to its board, signalling a renewed push to rejuvenate the group’s image.

‘FRIENDLY SUPPORT’

Tod’s said LVMH – led by French billionaire Bernard Arnault – would pay 33.1 euros a share for the stake, slightly below the stock’s closing price on Thursday of 35.3 euros.

That is well below the 40-45 euros a share Della Valle paid over the past couple of years as he increased his stake in the group by 9%, fuelling speculation he may take it private.

“With the Della Valle family having raised their stake at the end of 2019 at a much higher price, this transaction – although not material – suggests they acknowledge the turnaround plan has not worked and the need to bring more expertise in-house,” Citi analysts said in a note.

With a free float of just 300 million euros, Citi said LVMH could help Della Vale delist Tod’s to ease a restructuring.

Sources close to the matter have described the move as “friendly support” for Della Valle with one source saying the French luxury goods giant was not expected to increase its stake for now.

Analysts at Bestinver, however, said LVMH could be interested in adding Tod’s to its portfolio which already includes Italian luxury brands Bulgari, Fendi and Loro Piana.

The French group, often rumoured as a predator, has just completed a $15.8 billion takeover of U.S. jeweller Tiffany and has said it is focused on absorbing that purchase for now.

Milan-based broker Equita also flagged a possible sale down the road, even though Della Valle has repeatedly denied he inteds to sell.

The deal with LVMH, which has a market value of 319 billion euros versus Tod’s 1.2 billion, reduces the Della Valle family’s stake in Tod’s to around 64%, though a loyalty share system means they control 74% of the voting rights.

($1 = 0.8296 euros)

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