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UPDATE 1-LVMH raises stake in Italy's Tod's to 10%

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MILAN, April 22 (Reuters) - French luxury goods group LVMH will increase its stake in fashion company Tod’s to 10%, Tod’s said on Thursday, in a move which sources described as “friendly support” for the Italian struggling leather goods maker.

Tod’s said in a statement that LVMH would buy a 6.8% stake from Tod’s founder and Chairman Diego Della Valle. LVMH, led by French billionaire Bernard Arnault, already owned a 3.2% stake in Tod’s.

“Through this transaction, the twenty-year friendship between the Arnault and Della Valle families is reinforced”, Tod’s said in its statement.

A source close to the matter said the French giant does not expect to raise its stake further for now. Diego Della Valle has been a member of LVMH’s board of directors since 2002.

The Italian luxury leather goods maker has performed worse than most rivals as a result of the coronavirus pandemic in 2020. It said in January sales had fallen by almost a third last year, marking the fifth year in a row of falling annual sales.

The group, known for its loafer shoes, launched a new strategy in late 2017 to revamp its brand and lure younger consumers, but the health crisis has hampered its efforts. Earlier this month, Italian influencer Chiara Ferragni joined its board, in a move that pushed shares sharply higher and was seen as a bid to rejuvenate its image.

There has been recurring market speculation that Tod’s could be the target of a takeover by a bigger group, although Della Valle, who has increased his stake in the company in the past couple of years, has repeatedly denied this possibility.

“This may represent an excellent reason to consider further opportunities to be taken in the future ahead”, Della Valle said of LVMH’s stake increase on Thursday, without elaborating.

LVMH, which has more than 70 brands after building up an empire through a string of acquisitions, last week reported surging sales in the first quarter, beating market expectations and fuelling hopes it may be putting the health emergency squarely behind it this year.

The group is often rumoured as a predator, even though it has just completed a $15.8 billion takeover of U.S. jeweller Tiffany and has said it is focused on absorbing that purchase for now. However, Jefferies analyst Flavio Cereda said in a note late on Thursday there could be speculation of a further LVMH stake increase in Tod’s.

The price agreed for LVMH’s stake purchase is 33.10 euros per share, a 10% discount to Tod’s share price. Tod’s shares closed at 35.3 euros on Thursday.

After the transaction, which is expected to be executed on April 28, Della Valle will own 63.64% of Tod’s outstanding shares.

“We are very happy to reinforce further this partnership”, LVMH boss Arnault said in the statement.

Reporting by Claudia Cristoferi and Silvia Aloisi, additional reporting by Kanishka Singh in Bengaluru; Editing by Leslie Adler and Marguerita Choy

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