(Bloomberg) -- LVMH Moet Hennessy Louis Vuitton SE agreed to take over suitcase maker Rimowa for 640 million euros ($716 million) and will put Alexandre Arnault in charge of the group's first German asset, a sign that Bernard Arnault is expanding his offspring's role in the luxury empire.
The world's largest luxury-goods maker is buying an 80 percent stake from Dieter Morszeck, grandson of Rimowa's founder, LVMH said Tuesday. Morszeck will run the Cologne-based business alongside 24-year-old Alexandre Arnault, who gets his first big job at his father's group. The acquisition is LVMH's biggest since the 2013 purchase of cashmere maker Loro Piana.
A pedestrian walks past an ad for Rimowa in Singapore.
Rimowa's ribbed aluminum suitcases, a common sight in airport security lines, are owned by celebrities including Will.i.am and Gwyneth Paltrow. Selling for as little as $400, the cases are less of a luxury than LVMH's Louis Vuitton, whose trunks typically cost thousands of dollars. Founded in 1898, Rimowa's growth has outpaced the broader luggage market's 5 percent expansion over the past five years, an LVMH spokesman said.
“LVMH is looking for brands that have heritage and a unique position,” said Mario Ortelli, an analyst at Sanford C. Bernstein. “They know that when they acquire these brands they can accelerate their development.”
As part of LVMH, Rimowa will find it easier to get top locations in shopping malls and benefit from discounted advertising, Ortelli said. For LVMH, the acquisition will add annual revenue of about 400 million euros and follows its disposal of Donna Karan International in July. Rimowa -- whose designs are based on the fuselage of the first metallic aircraft -- has grown sales at a pace of 20 percent per annum over the past two years, RBC Europe analysts estimate.
LVMH shares rose 2.7 percent to 156.15 euros at 1:17 p.m. in Paris.
'Training Ground'
Alexandre Arnault becomes the third of Bernard Arnault's five children to take a leading role at the maker of TAG Heuer watches and Marc Jacobs fashions. Delphine Arnault, 41, heads the flagship Louis Vuitton brand, while her 39-year-old brother Antoine is CEO of shoemaker Berluti and chairman of Loro Piana. Alexandre is the eldest of three sons Bernard Arnault has had with his second wife, Helene Mercier.
“Alexandre is bright, and it's a good training ground and an important sign of recognition for him,” said Luca Solca, an analyst at Exane BNP Paribas.
Bernard Arnault, 67, has been broadening his children's responsibilities to test them as potential successors. He's not the only luxury mogul facing a succession quandary: Giorgio Armani and Chanel designer Karl Lagerfeld are in their 80s, while Roberto Cavalli is 75.
Rimowa, which made the world's first aluminum suitcase in 1937, operates in the more utilitarian side of the $18.8 billion global luggage sector alongside market leader Samsonite International, France's Delsey and Antler of the U.K. Those with more to spend often choose among Paris-based Goyard, Italian brand Valextra, Britain's Globetrotter or Louis Vuitton.
Rimowa's cases have a recognizable design of parallel grooves -- as does its Cologne headquarters -- and have become popular among celebrities including Kanye West and Kim Kardashian. Its more recent products include a suitcase with an electronic tag in it that can communicate to the owner's mobile phone via Bluetooth. So-called “smart luggage” products with features like Bluetooth or fingerprint locks are a fast-growing segment of the market, according to researcher Euromonitor.
Morszeck will keep a stake in the company and serve as co-CEO of Rimowa.
--With assistance from Corinne Gretler To contact the reporters on this story: Paul Jarvis in London at pjarvis@bloomberg.net, Sam Chambers in London at schambers7@bloomberg.net. To contact the editors responsible for this story: Matthew Boyle at mboyle20@bloomberg.net, Phil Serafino, Thomas Mulier
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