A Free Lunch | Blog

It looks like our argument in a recent blog - that LVMH shareholders were getting a free lunch – seems to have been understated. Bernard Arnault, the company’s driving force, might have made his most transformative deal yet and, moreover, have it mostly paid for by the European Central Bank.

Whereas our previous calculation (see our December 2019 comment) assumed 0.5% cost of debt funding for the Tiffany acquisition, the first EUR 9.5bn (of EUR14.5bn acquisition cost) has been locked in at even better rates through ECB’s Corporate Sector Purchasing Program. The issuance announced this week consists of five tranches; two of which carry negative yields. Even the longest maturity, an 11-year bond, has a coupon of no more than 0.45%. All in, this is around half of the price LVMH was expecting to pay when the structure of the deal was first laid out late last year.

So, what we thought would be an annual funding cost of EUR 73 million will now be somewhere between EUR 44m and 65 million. Trivial considering LVMH’s shareholders are accruing EUR 500-600 million of additional cash flow.

Risk Warning

The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested and may lose all of their investment. The value of investments in the investment funds contained on this website may be affected by the price of underlying investments. Exchange rate changes may cause the value of overseas investments to rise or fall.

Nothing contained on this website constitutes, and nothing on this website should be construed as, investment advice or a recommendation to buy, sell, hold or otherwise transact in any investment. It is strongly recommended that you seek professional investment advice before making any investment decision.

You should consider whether an investment fits your investment objectives, particular needs and financial situation before making any investment decision. You should also inform yourself and seek advice as to (a) the possible tax consequences, (b) the legal requirements and (c) any foreign exchange restrictions or exchange control requirements which you might encounter under the laws of the countries of your citizenship, residence or domicile and which might be relevant to the subscription, holding, transfer or disposal of interests in any investment fund.

To the extent that this website contains any information regarding the past performance and/or forecast of investment funds, such information is not a reliable indicator of future performance of these investment funds and should not be relied upon as a basis for an investment decision

Equitile Investments Ltd (“Equitile”) offers no guarantee against loss or that investment objectives will be achieved. Please read the Key Investor Information Document, Prospectus and any other offer documents carefully and consult with your own legal, accounting, tax and other advisors in order to independently assess the merits of an investment.

Equitile Investments Ltd is authorised and regulated by the Financial Conduct Authority in the United Kingdom and is a company registered in England, number: 09459099. Registered Office: 20 St Dunstan’s Hill, London, EC3R 8HL.

By clicking “Accept” you confirm that you have read and understood the above information.