LVMH Moët Hennessy Louis Vuitton [EPA:MC]’s sale of DFS Group is likely to take place this summer (Northern Hemisphere) at the earliest, according to four sources familiar with the situation.

The luxury-goods conglomerate, which has a market capitalisation of EUR 371.2bn (USD 404.9bn), the sellside advisor Morgan Stanley, have sounded out some potential bidders in preparation for the proposed sale, which may launch within the next two or three months, they said.

The anticipated sale timetable is tentative and may change subject to market conditions, the sources said. LVMH, which is owned by Bernard Jean Étienne Arnault, the world’s richest man, bought a majority stake in DFS in 1996 for a consideration of USD 2.47bn.

LVMH has characterised DFS as a non-core asset which it is ready to sell, according to the first source.

DFS, a Hong Kong-headquartered duty-free travel retailer, was severely impacted by the public health situation in China until 2022, but in 2023 began benefiting from a gradual recovery of international travel in Hong Kong and Macau, according to LVMH’s 2023 financial results report.

Strategics circle asset

DFS is being marketed at an estimated enterprise value (EV) of EUR 4bn-EUR 5bn, the first and second sources said.

The same two sources suggested potential strategic bidders for the travel industry mainstay could include companies like China Tourism Group Duty Free (CTG Duty Free) [HKG:1800], Avolta AG (Dufry) [SWX:AVOL] headquartered in Switzerland, Hotel Shilla [KRX:008770], and French media giant Vivendi‘s Lagardère Active [EPA:MMB].

Private equity firms will also be interested in this transaction due to DFS’s leading market position and a strong rebound by the tourism sector globally, the third source said.

Prominent players in the travel retail space will likely emerge as main bidders. Yet, with so many antitrust jurisdictions involved worldwide, prospective buyers may have to weigh potential combinations. For instance, a move by CTG Duty Free to take control of DFS assets in Europe and the Americas could face regulatory complications, while for Vivendi to embark on such a deal in the midst of a strategic review on its separation plan would also raise questions, the first source said.

According to LVMH’s financial report, there’s no standalone financial statement for DFS, which combines its financial result with Sephora and Le Bon Marché, presented under the rubric of “selective retailing segment”.

The segment reported revenue of EUR 4.2bn for the first quarter of 2024, according to LVMH’s Q1 financial report. It posted a profit from recurring operations of EUR 1.4bn on revenue of EUR 17.9bn for the financial year of 2023, according to LVMH’s 2023 full year report.

Apart from DFS, LVMH also owns a basket of luxury brands including Christian Dior, CELINE, Hennessy and luggage brand RIMOWA.

Established in 1960 by Robert Miller and Charles Feeney, DFS offers a selection of premium products from over 750 luxury brands, according to its website. Its network consists of 56 duty free shops located in 14 major global airports and 23 downtown Galleria (high-end shopping centres) locations on four continents, as well as affiliate and resort locations, the website stated.

Apart from its Hong Kong headquarters, DFS also has offices in Australia, Cambodia, mainland China, France, Indonesia, Italy, Japan, Macau, New Zealand, Singapore, the United Arab Emirates, the US and Vietnam, per its website.

Meanwhile, LVMH also reportedly engaged advisers to explore a sale of an American fashion label Marc Jacobs amid buyer interest, as reported in May 2024.

LVMH declined to comment. DFS and Morgan Stanley did not respond to requests for comment.