European family business titans Fiat Chrysler and LVMH look to consolidate their dominance in their automaking and luxury goods markets in an uncertain world by eyeing multi-billion dollar mergers.
The Italian Agnelli family, which controls Fiat Chrysler through its holding company Exor, was expected to approve the proposed $48 billion union with Peugeot-owner PSA, itself 12.2% owned by the French Peugeot family.
John Elkann (pictured), 43-year-old US-born fifth-generation heir to the Agnelli dynasty, chairman of $143 billion revenue FCA, chairman and chief executive of the $159 billion revenue Exor, plus chairman of Ferrari since last year, will chair the supersized automaker. Carlos Tavares will transfer his role as chief executive of PSA to the new entity, which would be headquartered in the neutral Netherlands.
The 50/50 combination would create the world’s fourth largest carmaker, with sales of 8.7 million vehicles, revenue of $189 billion and profit of more than $12 billion. The deal ushered in a “new era” of electric vehicles, autonomous driving, sustainable mobility and digital connectivity, FCA said.
The deal rose from the ashes of the family’s attempt to merge FCA with another French marque earlier this year.
The FCA-PSA combination would ramp up its rivalry with Volkswagen, the world’s largest automaker by sales, a €236 billion ($260 billion) conglomerate of 12 brands and 660,000 employees. Controlled by the reclusive fourth-generation Porsche-Piech family, VW electrified its own EV development in the wake of its emissions scandal.
This same week, LVMH, the world's largest luxury goods company, responded to market rumours to confirm it had held unsolicited “preliminary discussions regarding a possible transaction with Tiffany.”
The Paris-based Moet Hennessy—Louis Vuitton conglomerate, owned by the Arnault family, sought to downplay the all-cash takeover offer, worth about $14.5 billion: “There can be no assurance that these discussions will result in any agreement.”
Tiffany and Co said its directors were “carefully reviewing the proposal”.
The struggling 182-year-old jeweller, considered to be the sole US luxury brand with global recognition, would consolidate LVMH’s position in North America. The acquisition would be the Arnault family’s largest in value since Christian Dior was bought out in 2017 for $13.1 billion.
Bernard Arnault (pictured), 70, chairman of LVMH, and family owns 47% of shares in LVMH. The Arnaults look likely to climb the ranks of the world’s richest people from fourth place, according to Forbes, just behind Warren Buffett at #3, Bill Gates at #2 and Jeff Bezos at #1.
The group of almost 80 brands, including Fendi, Givenchy and Dom Perignon, was voraciously collected by Arnault since 1984. It recorded a 16% increase in revenue, reaching €38.4 billion ($42.8 billion) in the first nine months of 2019. Organic revenue grew 11% compared to the same period of 2018.
The International Monetary Fund in October forecasted global growth at 3% for 2019, its lowest level since 2008-09 and a 0.3 percentage point downgrade from its April 2019 World Economic Outlook.
Growth was projected to pick up to 3.4% in 2020 (a 0.2 percentage point downward revision compared with April), based on improved economic performance in Latin America and the Middle East. However, Europe was under “macroeconomic strain” and a “slowdown” was projected in China and the United States due in part to trade tensions.
More than half (55%) of families surveyed by Campden Wealth for The Global Family Office Report 2019 said they believed an economic downturn would be experienced by 2020. In preparation for an expected recession, 45% said they were realigning their investment strategies to mitigate risk. Up to 42% were increasing their cash reserves while another 42% were preparing to capitalise on “opportunistic events”.