Ladies and gentlemen, welcome to the LVMH conference call. I will now hand over to Mr. Chris Hollis. Sir, please go ahead.
Thank you. Hello, welcome. I am Chris Hollis, Director of Financial Communications at LVMH. I am joined by Jean-Jacques Guiony, the Chief Financial Officer of LVMH. We have some brief remarks about the agreement that we reached last night with Tiffany, which we just announced in Paris this morning. After these remarks, we will be happy to take your questions. I hope you've had the chance to read the press release, which we issued earlier this morning, as well as the transaction presentation, which we will use as today's guide. This press release, and the presentation are on our website. The press release includes a safe harbor statement, which is reproduced on slide two of the presentation, and both are available, as I said, on the website at www.lvmh.com. Let me start with slide three, where we summarize the key terms of this exciting transaction with Tiffany.
We have reached an agreement with the Tiffany Board to acquire Tiffany & Co. for $135 per share in cash. This represents an equity value of $16.2 billion, or around €14.7 billion for Tiffany, at a total enterprise value of $16.9 billion, taking into account the company's debt. This represents the largest transaction in the LVMH's group history. We're pleased to share that the transaction has been approved by both company board of directors. The closing of this transaction is expected to happen in the second half of the year, mid-2020, following the transaction of customary closing conditions, including approval from Tiffany shareholders and receipt of antitrust approvals. Moving to slide four, we've outlined some of the key figures from Tiffany. We suspect that most listeners are already familiar with Tiffany and its iconic brand. We wanted to recall some information you may not know offhand.
Tiffany is a renowned global designer, manufacturer, and retailer of luxury jewelry. The company is publicly traded on the New York Stock Exchange. There are more figures available. A few of the important ones include, the company sales for the last fiscal year, which ended on January 31st, 2019, were over $4.4 billion. The company's EBITDA during that period was over $1 billion, which represents close to a 23% margin. Tiffany's EBIT totals $790 million, or a margin close to 18%. Like many of LVMH's other Maisons, Tiffany, while anchored in the Americas, has a truly global reach with over 300 stores in more than 20 countries and over 14,000 employees. Tiffany is also active across all key jewelry categories.
More than half of the company's 2018 sales came from jewelry collections, while engagement jewelry, a category where Tiffany is an undisputed leader, comprised just over a quarter of the company's revenue last year. When you look at Tiffany's sales by channel, most of the company's sales come from their retail network, which is operated directly by Tiffany, with e-commerce representing 7% of sales and wholesale and other reflecting a very small percentage of sales. Tiffany is an iconic global brand that has been synonymous with American luxury since its creation almost two centuries ago. We've highlighted five facets of Tiffany we find the most interesting. A legendary American brand rooted in history with a rich and glamorous cultural heritage, a multifaceted brand with a balanced portfolio, a global reach with a tightly controlled distribution, and a brand that is vertically integrated with advanced sustainability practices.
Let's go through these five areas to help you further understand the value we see in Tiffany and why it is a great addition to our portfolio. On slide six, we've highlighted some images which are associated with Tiffany. For more than 180 years, Tiffany has been a symbol for things of great significance, diamonds, love, New York, refinement, and more recently, sustainability. It's a legendary American brand with a rich history. Its designs are timeless, and it all starts with the color of a box even before you open it. A wide range of shoppers easily recognize this blue as a symbol of New York luxury amongst thousands of others, and it hasn't changed in over 130 years.
As many of you know, Truman Capote and Audrey Hepburn gave a very strong notoriety boost to the brand in the 1950s and '60s through the timeless novel and the film of the same name, "Breakfast at Tiffany's," further positioning the brand as a global icon. The rich and glamorous heritage has deep roots, and on slide seven, we've outlined a handful of notable examples that relate to the source of this prestige. In the 19th century, 50 years after its founding in 1837, Tiffany purchased and turned the French Crown Jewels into a necklace that he sold to Mr. J.P. Morgan.
The brand's affiliation with ultra-high-end jewelry has continued to this day, as the Tiffany Blue Book is published every January, displaying the most high-end jewels and one-of-a-kind creations handcrafted by artisans in Tiffany's workshop above the Fifth Avenue flagship store. Over time, Tiffany has remained a consistent symbol of excellence in a much broader sense than just jewelry, as Tiffany-made trophies have also been at the center of American sports since 1860. The creation of a horse racing trophy, the first Super Bowl trophy, the NBA Championship trophy, and the US Open trophy are but some examples. Today, Tiffany is a multifaceted brand with a balanced portfolio in jewelry. Slide eight shows you a selection of their best creations over the years. The largest portion relates to the jewelry collections, and you can see some examples which have achieved great success: the T True, the Keys, and the Return to Tiffany.
On the engagement jewelry side, Tiffany's obsession with creating the most brilliant diamonds has made Tiffany products a symbol of love and a trusted element of the entire bridal experience, from engagements to weddings and anniversaries. In fact, Tiffany was the first jeweler to establish the diamond as a symbol of love, which has made the company a global leader in the field with more than a quarter of annual revenues from the category today. With respect to designer jewelry, Tiffany has successfully launched collections in collaboration with several designers. The gold and silver Medium Bone Cuffs by Elsa Peretti, and the lock cuff by Paloma Picasso are illustrated on this slide. All these pieces have a unique appeal to both young and old generations. If you turn to slide nine, you'll have a better view of Tiffany's presence across the globe.
It has, as you can imagine, a particularly strong footprint in the Americas, with 44% of total sales and more than one-third of its 321 directly operated stores. The weight of Tiffany sales in Asia, excluding Japan, its second-largest region, is comparable to LVMH's at around 30%. Which gives us great confidence in the business, as this is an area that we know very well. Tiffany is comparatively stronger than LVMH's average sales in Japan, with 15% of sales. It's worth noting that Europe only represents 11% of Tiffany sales. As you can see, Tiffany is a business with a global reach complemented by tightly controlled distribution, including some key flagship stores in prestigious locations. The New York location is illustrated on this slide. We believe this will contribute in a meaningful and positive way to the group's overall geographic balance.
Last but not least, like most other brands, Tiffany has full control over its value chain, from design to production. The company sources a majority of its diamonds and precious metals through direct relationships and known mines across the globe. Tiffany was an early proponent of obtaining these materials in ways that are socially and environmentally responsible. The company can trace the provenance of its products and continues to put great focus on environmental and social imperatives to ensure the sustainability of its operation. This aligns perfectly well with our values. Now I'm going to hand over to Jean-Jacques Guiony, CFO, who will look at the opportunities we see for Tiffany.
Thank you, Chris. To summarize on slide 11, we see Tiffany as a promising opportunity for LVMH. We were particularly very attracted in Tiffany as one of the most iconic luxury brands with a global footprint, via its direct network of stores and its unique centuries-old heritage. Its iconic collections are truly at the heart of the company's DNA and represents the majority of the business. Actually, for more than 180 years, Tiffany has been, in our view, synonymous with elegance, innovative design, fine craftsmanship, and creative excellence. Tiffany's iconic products, which include jewelry, timepieces, and other luxury accessories, are crafted using materials sourced with a socially and environmentally responsible rigor. We believe that Tiffany's other product line beyond jewelry present significant growth opportunities in the long term. Finally, we believe that within Tiffany, within LVMH, Tiffany will be able to accelerate its ongoing strategy.
Let's turn to slide 12 and look at how Tiffany is actually a particularly good fit for LVMH in its portfolio. The acquisition of Tiffany is an important milestone for our group as it helps further balance our revenue by segment. From a revenue perspective, by increasing the share of watches and jewelry from 9 to 16% on a pro forma basis, it reduces the weight of fashion and leather goods division by 3 points and selective retailing by 2 points. When we look at the transaction in terms of operating profit, the rebalancing is even clearer as watches and jewelry, which represented 7% of our EBIT in full year 2018, becomes our third-largest contributor with 13%, right behind Wines & Spirits and before selective retailing.
This transaction is truly a game changer for our watches and jewelry segment, and our enhanced scale will give LVMH increased opportunity to bring the best product and experience to our customers across the world, including in North America, where we'll be even stronger with Tiffany. The impact, I'm turning to slide 13. The impact of the $16.2 billion equity transaction on LVMH will be an estimated net income accretion of 5%. The acquisition has been secured through a $8.5 billion bridge loan, a $5.75 billion commercial paper backup line, and the EUR 2.5 billion revolving credit facility. The financing of the transaction will be secured through a mixture of both short-term and mid to long-term debt. The impact on LVMH leverage is limited to 1.6 times net debt to EBITDA in 2020, and Tiffany will maintain its quarterly dividend of $0.58 per share until closing.
As for next steps, the closing of the transaction is expected to happen in the second half or in mid-2020, following the satisfaction of customary closing conditions, including approval from Tiffany shareholders, which should take place in the coming two to three months, and receipt of antitrust approvals after that. In conclusion, I'm on page 15. In conclusion, we would like to review what makes us so excited about the acquisition of Tiffany and what we believe are the key benefits for LVMH. First of all, Tiffany is a truly unique U.S. luxury brand with two centuries of history. This heritage is an extraordinary foundation for the brand's appeal today and will be a perfect fit in our portfolio. It further balances our leading luxury portfolio across products and geography.
Certainly, this is a game changer for our watches and jewelry business group, reinforcing its position and benefiting from Tiffany's solid and sustainable operating model and best standards when it comes to sourcing. We expect to benefit from strong growth opportunities from both a geographic standpoint, in Asia notably, and a segment standpoint, with huge potential in new product segments such as watches and accessories. Tiffany is a perfect fit with our group's operating model and ambition to marry tradition and modernity. We strongly believe that LVMH is not only the ideal owner for Tiffany, but also that this iconic brand is a perfect addition to our portfolio and a perfect complement to our existing maison. Thank you, and we look forward to ensuring that the Tiffany brand continues to thrive for centuries to come as part of the LVMH group. With that, we'll open the call for questions.
Please, operator. Operator?
Thank you, sir. Ladies and gentlemen, if you wish to ask a question, you may press zero then one on your telephone keypad. We have one first question from Madam Zuzanna Pusz from UBS. Madam?
Hi. I have three questions, if I may. First of all, I was just wondering if you could share with us some general thoughts around the jewelry category. I think, given the timing of the deal is quite interesting because it seems like the jewelry category has underperformed leather goods quite a bit this cycle. I was just wondering if you could share with us your thoughts around that. Is it maybe limited innovation from other players in the market, changing consumer preferences or anything around that would be very helpful. Secondly, maybe on financial targets. Do you think that the brand could potentially reach, let's say, 30% EBIT margin in the long term, in line with some of its peers, or any long-term targets you may have in place would be very helpful. Finally, just very quickly on your first priority.
Assuming that the deal completes as planned middle of next year, what would be your first priority? Would it be maybe rationalization of the store network of Tiffany or maybe work on some of the products? It would be very interesting to hear that. Thank you.
Thank you, Zuzanna. Well, my reflection on the jewelry category, the jewelry segment, is mostly about, I would say, the strategic value of this segment, more than really the growth rate and the perspectives in the short term of the segment, which are obviously difficult to quantify and to comment at any point in time. We think the jewelry segment is extremely interesting. Not only it has recorded a significant growth over the past few years, but we're also saying that due to the capital-intensive nature of this business, and also due to the fact that there is probably even more than other segments in luxury, an element of trust in the way the customers interact with the business. For these two reasons, the barriers to entry in this segment tends to be quite high.
Actually, when you look at it, the main players are not that many in this segment, and only a handful of companies are really the dominant players in the segment with an element of critical mass. We think that's the main attraction of the segment, beyond any comments we could make on short-term growth and what we've seen in the last few years. On your second point about financial targets, obviously we have some ideas, which I will not share with you. One of the elements that we think is important when you look at Tiffany is that we believe that the company is not only a fabulous brand, but it also has a very sound and logical strategy.
The only issue they have is that implementing a long-term strategy of increasing the value of the brand when you have to do quarterly reporting is not that simple, and the pressure is tremendous to obtain short-term results and doesn't help taking a long-term view. In other words, by buying Tiffany, we would take them off the market's eyes to some extent for a while. Obviously, it would be foolish on our side to replace the pressure from the market by setting public targets that they will have to comply with in the next few years. That's why on all the questions that I'll be asked about where we intend to go, how quickly do we expect to increase the margins, et cetera, I will not answer.
What I can tell you is that we are optimistic that we can, with this fabulous brand, increase the revenues further and expand margins. You would have been certainly surprised if I had said the contrary. I will not quantify what our objectives are. I want to reassure you, we have very precise objectives, and we expect, as we did with other acquisitions, to meet them, if not do better. Third question on priorities. Our first and only priority is actually to implement the strategy that has been described by the management team in the future, which is based on elevating the brand, improving the network, and developing the collection business, which we think is already pretty impressive but could develop even further. We have no particular priority. Is it network? Is it product? Is it branding, et cetera?
We want to give the company the possibility to do everything at the same time, because it's what is required to do to push this brand further. No particular priority, but definitely a very significant strategic ambition to push the brand further through product, network, and branding.
Perfect. Thank you. That's pretty helpful.
Thank you, madam. Next question from Mr. Edouard Aubin from Morgan Stanley. Sir.
Good afternoon, Chris and Jean-Jacques. Two questions from me in terms of areas of improvement, sales density, and product mix. If you look at sales density, Tiffany is posting sales density, which are substantially lower than industry leaders. For example, such as Bulgari. According to you, is it mostly down to poor location in some malls or the sales mix, or by leveraging LVMH retail expertise and excellence, is there room to improve sales density, everything else being equal? My second question is on the product mix. As you mentioned earlier, Tiffany is quite exposed to engagement rings and low-price silver lines. To what extent you want to change that? I guess related to that, as you said as well, Tiffany has a long list of iconic jewelry lines.
Do you mostly want to capitalize on the existing lines, or do you feel there is a need to introduce new ones as well? Thank you.
Thank you, Edouard. The sales density question, why is that so? You probably had opportunities in the past to ask the company why is it the case. In my view, you have two different Tiffany's. You have a Tiffany in the U.S. with pretty large and numerous stores, and at the end of the day, a density which is not extremely high, and you have a density outside the U.S., which compares quite well with the rest of the industry. Obviously, we expect to boost sales density in the future, but there is no miracle recipe. The sales density is only a function of products, branding, and the quality of the image. You work on everything else, and you end up increasing the sales density. You cannot work on sales density as such. It's just a consequence of the quality of the job done elsewhere.
On the product mix, you mentioned engagement rings and silver as a particular area of, I don't know how to qualify, focus on your side. As far as we are concerned, we believe these are two very important points in the portfolio of Tiffany. The success of Tiffany in engagement rings is a testimony of the strength of the brand, actually. Engagement rings is a very competitive business, where it is quite difficult to differentiate products. Tiffany is definitely second to none in this particular segment. We view that as a particular strategic strength for the business. As far as silver is concerned, for us, silver is an enterprise product, and there is absolutely nothing wrong with enterprise. All the luxury brands, or almost all the luxury brands, have an enterprise business.
The question is not the price at which we sell any items, but whether such items carry the value of the brand. Take a Dior lipstick. It is not particularly expensive. With $30, you get one, but it remains a Dior product with the Dior attributes. As such, we have no problem whatsoever, and we don't think, on the contrary, actually, that the Dior lipstick is doing any harm to the brand. Silver for Tiffany, as far as we are concerned, is exactly the same. It's enterprise, and it allows people to enter the brand with a few hundred of dollars, and it's absolutely fine. We have no problem whatsoever with this line. The third question about collection and whether we want to capitalize or we want to expand the collections, I would say we want to do both.
They have, at Tiffany, some fabulous collections, such as Key Return to Tiffany or Keys. Obviously, it's very important to capitalize on such tremendous success. As far as we know, Keys ranks amongst the largest collection in the jewelry industry in the world. It's quite important to capitalize on that. Overall, the more the better. If we can invent another two or three keys in the next few years, we'll be all the more happy. That's absolutely fine with us. It's really capitalizing on existing lines, but also developing new ones.
Okay. Thank you.
Okay, bye.
Thank you, sir. Next question is from Mr. Antoine Belge from HSBC. Go ahead.
Yes, good afternoon. It's Antoine Belge at HSBC. There are three questions here. First of all, with regards to the timing of that acquisition, I think over the last 20 years, you've been asked quite often about the Tiffany acquisition. In the past, sometimes it seems that it was a bit too U.S. or had some weaknesses. What is new there, and what do you think is it that it's a right timing now to be doing that deal? Second question relating to the 5% EPS accretion that you mentioned on 2020. I assume this is calculated on a full-year basis, but is it possible to have the interest rate assumption that you've retained? Is that amount already increased some kind of synergies?
Finally, with regard to the management team, has there been any agreement regarding the top management position and especially the role of Alessandro Bogliolo in the future? Thank you.
Thank you, Antoine, for your three questions. On the timing, I'm afraid that your recollection of our past conversations on Tiffany are a bit inaccurate, if I may. You've been asking me the question probably 25 times. Each time, I've said that we have a great respect for Tiffany. The reason that we were not moving is that it was not obvious for us what we could do better. It was a good company, good management, good strategy. It was not obvious what else could we do. Actually, after some years thinking about it, we got the answer. The answer is we will not necessarily do much better or much differently, which is probably more important than what is being done, what has been tried in terms of strategy today. What we'll do is actually enable this strategy to be implemented.
What I mean by that, I alluded to that already, is that the stock market listing doesn't help the implementation of a long-term strategy. I think by allowing Tiffany & Co. to develop its strategy without the quarterly scrutiny of the market will enable them to drive what they think they should be doing in a different context, which is much more favorable for the success of the strategy. That's probably what we've learned over the past few years, and that we haven't changed our mind. We have always said that it is a great brand, an iconic one, and that the strategy is the right one. The 5% EPS accretion, no synergies into that. It's a bit early to talk about the financing costs. We have taken an assumption, which is depending on whether we shall be funding into dollars or into euro part of the transaction.
We should be in between 20, 30 basis point and about 1%. It's a blend of different tranche in different duration and currencies. That's how we've been calculating the 5% EPS accretion that with no synergies being taken into account. As far as the management team is concerned, I am not legally in a position to comment on that. We know many members of the management team, and we have been knowing them for quite a while. We approve the strategy that they are implementing, as I said before. Again, legally, I cannot comment in any way on that particular point.
Yeah. Thank you. Maybe just a follow-up. If I understood correctly, so what LVMH will bring to Tiffany is, as you said, the ability to do many things at the same time rather than having to make sure that the targets to the market were met. Is it fair to assume that the margin will go a bit down before they improve, a bit like what we had seen with Bulgari? Given that if all the investments happen in the short term, then that could give a bit of a pressure to the margin, at least over the short term before they improve.
It is a possibility. If it is required to meet long-term strategic objectives, certainly. I don't rule it out, although obviously it will be in a limited way. The impact of boosting A&P, for instance, on margins is unlikely to be tremendous, but it could be a few tenths of basis point. Yes, I agree that's a possibility.
Thank you very much.
Thanks, Antoine.
Thank you, sir. Next question is from Mr. Omar Saad from Evercore.
Thank you. Thank you for taking my question. Congratulations. Certainly a unique asset. I want to make sure I understand. Is the number one kind of revenue synergy here that you see as the opportunity with Tiffany & Co. to take it out of the public spotlight, to do more investment, and maybe make simultaneous investments that the company wouldn't have otherwise been able to make? Is that the clear opportunity to be able to accelerate investment and broaden it out in a way that they wouldn't have been able to have done as a public company standalone? Are there other opportunities in terms of data insights, I mean, the scale of your platform, do you see other opportunities to bring to bear capabilities of the LVMH broader platform in this one brand? Thank you.
Thank you. Well, obviously, there are. You mentioned data. We could mention retail as well. The frames of the LVMH group, particularly when it comes to picking up the best retail spots and the ability we have to move brands in our various locations, enables us to occupy, in a given place, most of the time, the top spots. That's certainly of help. Although when you look at Tiffany's presence in most of the markets, it's already quite good. There are obviously things that we'll be discussing if this transaction goes through, that will benefit Tiffany from what we do, and vice versa. We mentioned a few times, sourcing and sustainability. We also think it's something quite important we could learn from them. They are definitely leaders in that important area in this jewelry segment. This being said, you summed that pretty well, what I said before.
In a nutshell, we expect to bring Tiffany time and capital, which are the things that are not that easy to get when you're quarterly reporting to the stock market.
Okay, got it. Maybe one follow-up. When you think about the Tiffany brand, you talked a lot about its unique aspects. In your mind, is it American luxury or is it New York luxury? That's my last question. Thanks.
It's luxury. Full stop. The great thing with the brand is that when you think about it, you have many things that come into your mind immediately. I could mention New York. I could mention romance and love, the blue box, Audrey Hepburn. There are not that many brands when you think about it, that have so many attributes immediately identifiable or attributable to a brand like that. For us, this is a true luxury brand with a U.S. or American heritage, which makes it even more unique.
Thank you. Congrats again.
Thank you.
Thank you, sir. Next question is from Mr. Oliver Chen from Cowen and Company.
Hi. Thank you, Jean-Jacques and Chris. Regarding Tiffany, it has a very unique supply chain as well with diamond polishing facilities and relationships with critical mines. What are your thoughts on leveraging that and what kind of synergies that may be able to drive across your Maisons? Would also love your take on your thoughts on the nature of the stores and what may happen there in terms of experiential. Tiffany is undergoing a major flagship renovation as well. Would love your views on what that may mean and what are some early thoughts on that.
Thank you, Oliver. On the supply chain synergies, obviously, we think that Tiffany is definitely in advance, particularly due to its very high level of vertical integration, very much in advance compared to our own brands, or at least they have a different strategy, where the level of vertical integration and owned sourcing is much higher than what it is for most of our jewelry brands. We intend to capitalize on that and create some synergies, and we are sure that some value could be extracted from combining the two business models in the group. This being said, we don't intend to change the sourcing strategy and the manufacturing strategy of Tiffany. We think it's a unique asset, and we will develop that, and we think it could help our own brands, but we will not change it.
As far as stores and flagship, particularly the flagship in New York is concerned, well, what Tiffany is implementing in New York is really what has to be done from time to time. The network is a living body. You have to invest in it at all times and change it at all times. In my view, despite the fact that the flagship in Fifth Avenue was iconic, mostly due to the "Breakfast at Tiffany's" movie, it's also something that the brand needs to invest in. I think the plan they have is the right thing to do. Not to mention that it was probably overdue, and I sympathize with the difficulty of taking the decision to refurbish a store of that size and of that importance. At some point, you have to go for it.
Roughly speaking, there should be investments in the whole network, not at the same time, but all the time. The network has to be managed with a view of being improved, embellished, changed at all times to reach the customer in a new fashion years after years. If we get through with this transaction, we'll discuss with the management the capital expenditures plan on a long-term basis and see what can be done to improve the customer's experience in the network, which is already quite large and substantial for a brand like this.
Okay. Another topic has been thinking about Gen Z and millennials. You've obviously been an expert company thinking about experiential. What's been happening in the U.S. is really a changing nature of engagement and younger people getting married a little bit later. What are your thoughts about the nature of this transaction as you think about a new generation of wealthy consumers globally and how this fits into your strategy?
Well, I don't think the concept of love is decreasing in any way, even with the new Gen Z, millennial generation. Basically, what we are talking about is Tiffany symbolizing actually love through part of their product offering. In this respect, whether the trend in official weddings increases or decrease, in my view, doesn't make a big change. Love will prevail and is likely to be symbolized by some elements. It could be locks in bridges in Paris. It could also be a nice diamond ring in a blue box, and we expect the nice diamond ring in a blue box to prevail as well.
Okay, finally, Tiffany's e-com penetration has been impressive, and they have a heritage in this space. They're also undergoing some really compelling changes on this side, as well as thinking about CRM and inventory management. Would love your thoughts on how that may synergize with what you're doing and what your thoughts are of the intersection of digital and luxury?
Well, it's a little bit early to answer on this, but we also note that what they've done in e-commerce is impressive, particularly in a category which is not very easy for e-commerce, and we expect to learn from Tiffany on that for our other jewelry brand.
Thank you. Congrats.
Thank you.
Thank you, sir. Next question is from Mr. Christophe Lardet from Baader Bank. Go ahead.
Hi, Jean-Jacques. Hi, Chris. Thank you very much for the big deal you made today. It's a nice surprise. We're all happy about it. Given the success of what LVMH has achieved with Hublot and Bulgari, could you elaborate on what you mean by to accelerate ongoing Tiffany strategy as part of LVMH? Do we have the answers already in the previous questions, or is there something else? My second question is, with Tiffany, you're becoming a big player in jewelry. Do you believe that your scale and firepower in terms of marketing spend, investment, and so on, will bring a change to the market environment and conditions? Thank you.
Thank you, Christophe. The first question is, I think I've answered already. There is no particular hidden recipe or anything that we wouldn't have commented already. I already mentioned what we intend to continue or to allow Tiffany to accomplish in terms of brand, in terms of network, and in terms of product. We share the belief that the direction is the right one. It's just the framework and the environment that could make it easier to achieve. As far as our global position in jewelry is concerned, well, I don't think so. I don't think this will change in any way the competitive scene. I mentioned the fact that the barriers to entry in this segment are quite high. Tiffany is obviously a player with a critical size, and the strategic positioning should be viewed on a brand-by-brand basis rather than on a group basis.
We are expanding in an exciting category, which is jewelry, but we don't expect the fact that we expand in such a category to change the competitive landscape.
Okay. Thank you.
Thank you. I hope your voice is getting better.
Thank you.
Thank you, sir. Next question is from Madame [Dana Telsey ] from [Telsey Advisory Group] Go ahead.
Good morning. Congratulations. As you think about the Tiffany acquisition, what learnings from the Bulgari integration do you think can be applied to Tiffany? As you think about growth opportunities with Asia and millennials, how do you see the opportunity to expand the reach for Tiffany? Thank you.
Thank you, Donna. The learnings from Bulgari is a good question. I would say that what we've learned, in my view, from Bulgari, is the importance of collections. You can have a great brand, you can be well-positioned, but it's necessary on top of whatever we can do in terms of bridal or access business, and collection is really the core of the brand. One of the great success, in my view, at Bulgari, is that we've been able to develop, to expand the share of collections over the past few years to an extremely high level. It explains both the growth in revenues and, in my view, the growth in the profitability as well.
In this respect, Tiffany is well-positioned, but we will insist, not sure we will have to, but we will insist very much in the future on the importance of developing, on capitalizing on existing collections and on developing new ones. That I would say the main lesson I would draw from the Bulgari experience. As far as Asians are concerned, the only thing I may comment on that, when I look at the business done with Asian, is probably that it is a little bit underrepresented in Europe. Tiffany's business in Europe could be stronger, could be stronger with locals, but could also be stronger with travelers throughout Europe. For our brands, it's sometimes a very big share of the business we do, and particularly with Asians. It's something we would like to understand better and to work in the near future.
Thank you.
Thank you, Dana.
Thank you, madam. Next question is from Madame Marion Bichol from MainFirst. Please go ahead.
Hi. Good morning. Good afternoon, everyone. Three questions for me, please. When you refer to expansion of non-jewelry items, were you only thinking hard luxury, or you could extend to other categories? You were just mentioning potential profitability improvement, notably with collections. Are there other leverage you see besides the retail and probably some sourcing synergies? The last question is just on the EPS question for this year, the 5% you mentioned. You've taken some synergies, or it's a full-year consolidation pro forma, or is there something we're missing?
It's a full-year pro forma.
Okay
analysis with no synergies.
Okay. Basically it should be less because it will be consolidated only in H2, 2022.
In H2 2020, yes.
Yeah. Okay.
We don't know exactly when, but yes. That's likely. It's a pro forma full-year-
Yeah
2020 impact. I thought it was clear, but sorry if it wasn't. Your question is welcome because it gives me the opportunity to be clear on that point. Thank you. On your other two questions on the other categories, well, we are talking about what we can obviously do within a retail environment like the one of Tiffany, it's obviously hard luxury, including watches, although we are humble about this one. It's not an easy category. Tiffany tried in the past with a view of selling mostly in their stores, and which was probably the right thing to do, but with limited success. We'll look at it. We are not buying Tiffany because we feel we can develop the watch business, which is underdeveloped. No, not at all.
We will look at the opportunity, try to develop it, but without necessarily having, in the short term, extremely high ambitions on that one. There are other products. We mentioned accessories. Accessories could be small leather goods, scarves, et cetera. It's a little bit of a longer shot. We'll think about it, but it's something that we would be foolish not to do. We'll see. At Bulgari, we've been pretty successful in selling non-jewelry items, so why not? In terms of profitability improvement, I think we discussed it a little bit. You mentioned whether there could be some improvements stemming from manufacturing or sourcing, et cetera. I don't think so. When you look at the gross margin of Tiffany, given its business mix, it's already pretty high. I don't have enough details or full details to figure out whether it is as good as it could be.
It seems to me that it's already pretty high, and I don't think we'll be increasing, in the future, this level in a very significant way.
All right. If I may follow up, what have you discovered in the past month that has led you to increase the offer? If there was something.
Well, I would say, the normal discussion that takes place in between a buyer and the target. Obviously, the first price you put on the table is not your final price, otherwise chances are that the discussion will become very soon complicated. It's not only what we discovered, it's a normal discussion between buyer and the target, and we think we ended at a price which is absolutely in line with our valuation analysis, both from a quantitative and qualitative viewpoint. We ended up with a fairly balanced deal, which is in both the interest of the Tiffany shareholders and the LVMH shareholders.
Okay, perfect. Thanks.
Thank you, Marilyn. Next question is from Mr. [Ari Skia] from [Hemlax]. Sir, please go ahead. We have another question from Mr. Joshua Friedman from Rapaport. Sir, please go ahead.
Hi, this is Joshua Friedman at Rapaport. Following from your earlier answer about sourcing, are you saying that Laurelton will start supplying diamonds to other LVMH jewelry brands? If so, how exactly will that work?
Sorry, I missed your question. Your question is about sourcing and whether we will use the diamonds or sourcing.
No
other brands. We have to look at it. It's something that is conceivable, but the devil is in the details. For the time being, we don't have enough information to figure out exactly how we would do that. In the comment I made, I simply recognize the fact that Tiffany is a very big player in diamond, all sorts of diamond, I would say. It's something where the sourcing is not that easy to do, and we expect to benefit from that. Exactly how we will do that, a bit early to comment today.
Okay. Thank you.
Thank you. Maybe another one or two questions.
Yes, we have another question from Mr. Jason Brown from Antara Capital. Sir, go ahead.
Yes. Hi. Is there any plans to take out Tiffany's bonds?
No, not particularly. We have looked at the documentation. We don't think it comes automatically to us. For the time being, we don't intend to buy them back.
Okay. Thank you.
Thank you, sir. We have one last question from Mr. Paul Duduit from Axima Particulier. Go ahead.
Yes. Congratulations, Jean-Jacques and Chris, for this transaction. You answer quite in details regarding the strategy. One question regarding the financing on this acquisition. You already refinance this acquisition, and you detail the process on your slide. The next step, and if you are able to disclose the information, do you anticipate a withdraw of Tiffany on the stock exchange, or you will have a mixed on the public offer, of course, to pay on cash or to do some exchange to LVMH, for example?
No. We are under a merger agreement scheme, and the merger agreement provides that if the transaction is approved by the shareholders meeting of Tiffany, all the shares pending approval of some condition precedent being met. Once it happened, all the shares of Tiffany will transfer to LVMH, 100% of them in exchange for cash. It's a fairly simple, straightforward, and efficient system because we get the shareholders' approval, and once we got it, the transaction goes through, and all the shares transfer to the acquirer. It's a pretty good system, and we'll apply it, obviously.
Okay. Thank you very much.
Thank you. Okay, thanks a lot. I hope this answers your question. Next time we speak will be the full year numbers, which will obviously not take into account this strategic move. As we said, it is not before two months that we'll be in a position to report the Tiffany numbers if this transaction goes through into our own consolidated numbers. Thank you very much and have a good day.
Okay. Thanks. Bye.
Thank you.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.