Luxury goods maker LVMH has agreed to buy Belmond, the owner of hotels including Venice's landmark Cipriani, for $3.2 billion including debt, to increase its presence in upmarket hospitality.
LVMH, the firm behind fashion labels Louis Vuitton and Christian Dior, already has hotels including the Cheval Blanc in the prestigious Courchevel ski resort in the French Alps, as well as Bvlgari hotels.
The Belmond deal will give it properties including the only hotel within the Machu Picchu citadel in southern Peru, Hotel Splendido in Portofino on the Italian riviera and the Copacabana Palace in Rio de Janeiro, moving LVMH further into the fast-growing "experiential" high-end travel and hospitality sector.
Wave of deals
The transaction follows a wave of deals in the luxury hotels sector, including AccorHotels' purchase of FRHI Holdings, the parent of the Fairmont and Raffles hotels.
“While some investors may question the acquisition, which appears to lie outside LVMH group’s core operations, we believe it is consistent with its long-term strategy focused on offering the consumer a full spectrum of luxury experience,” Berenberg analysts said in a research note.
LVMH said it would pay $25 per Belmond share, a 40 per cent premium to Thursday’s closing price.
The deal, expected to close in the first half of 2019, values Belmond’s equity at $2.6 billion, and the group, including debt, at $3.2 billion.
Earnings
Belmond posted earnings of $140 million before interest, taxes, depreciation and amortisation (ebitda) on revenue of $572 million in the 12 months to September 30th.
LVMH shares were down just under 1 per cent in a weak European stock market.
RBC Capital Markets analysts said the price of the deal – at 5.6 times recent sales and 22.9 times recent ebitda – looked “optically high”, but added: “Belmond owns a unique portfolio of trophy real estate assets, that will allow LVMH to increase its exposure to experiential luxury.”
Belmond owns, partly owns or manages 46 luxury hotels, restaurants and train and river-cruise properties located in exotic and distinctive destinations worldwide.