De Beers and LVMH form a new jewelry retail company

The anticipated merger between De Beers, the world’s leading diamond miner, and luxury goods group LVMH Moët Hennessy Louis Vuitton has happened. The two giants agreed on January 16 to establish an independently managed and operated company to sell jewelry under the De Beers brand name.

The companies said in a statement that they will invest equal, unspecified amounts in the venture, which they said will be managed independently.

Despite its well-known advertising campaign, with the slogan ‘A diamond is forever,’ De Beers has never been a gem retailer, but a miner and marketer of rough diamonds. Under the terms of the deal, the century-old South African diamond company will transfer rights to use its name to the independent company.

The move will give De Beers a chance to develop the potential of its already strong brand name, and will give the two groups a strengthened position in the retail diamond market.

The key to the deal is the expansion of the De Beers brand name. The new venture will not buy diamonds directly from De Beers but obtain its gems from outside suppliers. The South African group, which will not have a daily role in the venture’s operation, will maintain its focus on mining and marketing, the statement said.

‘The expertise of LVMH will not only help realize the value inherent in the De Beers brand but also create a more competitive market for diamond jewelry,’ Nicky Oppenheimer, De Beers chairman, said in the statement.

For LVMH, best known for luxury handbags, fashion and champagne, the joint venture offers a chance to strengthen its position in the jewelry market.

Headed by billionaire entrepreneur Bernard Arnault, the French group already has a portfolio of names such as Dom Perignon, Louis Vuitton, and Tag Heuer watches.

LVMH’s group managing director, Myron Ullman, will chair the board of the new group, which will open a small number of shops in major cities in the next 12 to 18 months.

De Beers holds about two-thirds of the world market for uncut diamonds, and its London marketing arm, Diamond Trading Co., sold a record $5.7 billion of rough gems last year.