Louis Vuitton just got a bit more exotic after its parent company, LVMH, assumed control of leather tannery Heng Long International. LVMH now owns 51% of the exotic skins supplier while the Koh family that founded the business owns the other 49%. It’s estimated that LVMH spent around €92 million, or approximately $120 million US, to buy out the Kohs.
Business analysts say it makes sense for LVMH to make such a significant investment though. By investing directly in suppliers and subcontractors, LVMH is effectively controlling the supplies of the exotic materials. That’s a great position for the firm to find itself as the price of leather and other skins continues to rise. It’ll also help Louis Vuitton enjoy the pick of Heng Long’s exotic skins.
Louis Vuitton probably couldn’t find a more secure company to invest in either. Heng Long International is a family-run tannery, that’s been with the Kohs for four generations. They’ll continue to control the day-to-day running of the business, and no doubt enjoy LVMH’s healthy investment.
“This is an excellent fit between two partners who share demanding standards for sustainable development and conservation of wildlife species,” a LVMH spokesperson said in a statement that’s likely to baffle animal rights activists. I suppose any standards for exotic skins are better than no standards at all though, right?
The Koh family has also entered into a long-term shareholder agreement with LVMH. Key Heng Long International figures, managing director Chon Tong Koh and Choon Heong Koh, have agreed to stay on at their stations for at least the next five years.
It sounds like a bit of a win all round to me. What do you make of LVMH’s latest business deal?
