A Chanel Deal May Be Out of Reach, Even for LVMH

PARIS — Speculation over the ownership of fashion house Chanel has intensified since the February death of creative chief Karl Lagerfeld, however it seems that even the world's largest luxury company thinks a takeover would be too big to swallow.

Chanel is worth nearer to €100 billion ($113 billion) than the €50 billion that some analysts have estimated, so it’s unclear who might be interested, LVMH managers told analysts at an investor day in Paris this week, according to a note by Jefferies International Ltd. analyst Flavio Cereda. An LVMH spokesman wasn’t immediately reachable.

The comments only add fuel to the fire over the future of Chanel, with owners Alain and Gerard Wertheimer having both reached retirement age. The maker of Boy handbags and the iconic No. 5 perfume issued a strongly worded statement in March to halt rumours of a potential sale. Yet the topic hasn’t gone away, with some analysts suggesting that the company’s vast scale may make an initial public offering a more likely exit route.

"Should the owners want an exit strategy — which they often said they don't — an IPO looks probably a more likely scenario," said Jelena Sokolova, an analyst at Morningstar Inc. A valuation of €100 billion "makes sense," and means Chanel would be "too big to swallow" even for other luxury players, including Kering SA, Richemont and Hermes International, she said.

From LVMH’s perspective, it may not even need such a deal given it’s developing a “mini-Chanel” of its own “internally” with Christian Dior Couture, according to Cereda of Jefferies.

By Albertina Torsoli; editors: Beth Mellor, Paul Jarvis, Celeste Perri.