Tiffany & Co. (TIF) Should Command $160-$180/Share in a Sale to LVMH - Cowen

Cowen analyst Oliver Chen weighed in on a possible takeover of Tiffany & Co. (NYSE: TIF) by LVMH and said TIF deserves an "exceptional premium" of 20x EBITDA or higher, or $160 per share.

"Based on our analysis, LVMH has ample financial capacity for a deal and we also expect many strategic and financial synergies given margin expansion, product extension, and global growth opportunities at TIF," Chen commented.

"From a valuation perspective, in our view, TIF would deserve an exceptional premium – at ~70% higher vs. the LTM average and ~33%+ vs. a potential $120 offer," he added. "Based on transaction comp analysis, we believe a fair valuation would be closer to at least ~22x EV/EBITDA similar to Bvlgari and Versace transactions – and we believe margin and growth opportunities at TIF are substantial."

Chen beleives Tiffany's brand equity, strategic positioning as a gifting authority, brand DNA as a diamond and bridal authority are leading qualities and deserve an "exceptional premium."

"We believe a takeout should be closer to ~22x EV/EBITDA, similar to Bvlgari and Versace at a premium vs. the average historical transaction multiple of ~17x EV/EBITDA (LTM). This valuation yields an offer price close to ~$180, which is ~80% premium to the average LTM stock price. Note Bvlgari's deal price was ~60% premium to Bvlgari's average trading price and the deal was ~40% stock & ~60% cash. We also view that the higher multiple is justified given a host of potential revenue and expense synergies that can be created from the acquisition. LVMH's premium luxury platform and expertise in marketing and branding can accelerate TIF's growth and we believe direct production synergies can emerge with TIF"s vertically integrated supply chain."

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