In a strong sign of the enduring power of luxury travel, Paris-based LVMH Moët Hennessy Louis Vuitton today entered into a definitive agreement to acquire London-based Belmond Ltd., whose portfolio includes luxury hotel, restaurant, train and river-cruise properties.
LVMH will pay $25 per Class-A Belmond share in cash, a 42 percent premium over its closing price in the U.S. on Thursday. The deal represents an equity value of $2.6 billion in a transaction with an enterprise value of $3.2 billion. LVMH's shares fell as much as 3.1 percent early Friday.
The transaction is expected to close in the first half of 2019 subject to the approval of Belmond's shareholders and clearance by the relevant competition authorities.
“Following a strategic review that attracted broad and deep interest from a wide range of real estate and lodging companies, sovereign wealth institutions and other financial buyers around the world, the board has concluded that this transaction with LVMH provides compelling and certain value for our shareholders, as well as an exciting path forward with a group that appreciates Belmond’s irreplaceable assets and strong management team,” said Roland Hernandez, chairman of the board of directors of Belmond Ltd., in a statement.
Belmond's appeal for a buyer is understandable. In the 12 months ended September 30, Belmond recorded total revenues of $572 million and adjusted EBITDA of $140 million.
“Belmond’s acquisition by LVMH is credit positive as Belmond's luxury assets, including iconic properties such as Hotel Cipriani in Venice and the Copacabana Palace in Rio de Janeiro, will be a good fit in LVMH's luxury-brand portfolio,” said Moody’s lodging analyst Pete Trombetta. “Over the past year, the luxury segment of the lodging industry has outperformed other segments in terms of revenue per available room (RevPAR) as consumers, especially the younger generations, have placed more value on unique experiences over buying goods.”
Belmond was formerly known as Orient-Express hotels, but rebranded in 2014. The company was established more than 40 years ago with the acquisition of Hotel Cipriani in Venice. The company now owns and operates a portfolio of 46 hotel, restaurant, rail and river-cruise experiences in 24 countries. Its lodging portfolio includes Hotel Splendido in Portofino, Copacabana Palace in Rio de Janeiro, Le Manoir aux Quat'Saisons in Oxfordshire, Grand Hotel Europe in St. Petersburg, Maroma Resort & Spa in Mexico, Hotel das Cataratas in the Iguassu National Park in Brazil, and Cap Juluca in Anguilla. It also operates the Venice Simplon-Orient-Express and Belmond Royal Scotsman rail lines, as well as cruises.
While Belmond may have a stronger presence in the overall hospitality sector, LVMH is no neophyte. The company has a hotel-management group that includes properties under the Cheval Blanc name, including the Courchevel ski resort in the French Alps. It also has six hotels open under the Bvlgari brand and is poised to open hotels in Moscow, Paris and Tokyo over the next four years.
But LVMH is best known for its luxury products, including fashion and leather, watches and jewelry, perfumes and cosmetics, wines and spirits and accessories, among others. But luxury goods versus luxury travel may tilt more toward the latter in the near term. As Reuters notes, for example, concerns over the health of China’s economy and potential damage from Washington’s protracted trade spat with Beijing may drive down Chinese demand for high-end items. This acquisition, then, could be seen by observers as a good way for the company to hedge its bets after spending $7 billion last year to take full control of fashion house Christian Dior.
“Belmond delivers unique experiences to discerning travelers and owns a number of exceptional assets in the most-desirable destinations,” said Bernard Arnault, chairman and CEO of LVMH. “Its entrepreneurship resonates well with the values of the Group and is complementary to our own Cheval Blanc maisons and the Bvlgari hotels activities. This acquisition will significantly increase LVMH’s presence in the ultimate hospitality world.”