JP Morgan M&A Presentation

DECEMBER 15, 2008

JPMorgan
Amber, XI Fengbo
Nelly, FANG Li
George, CHEN Long

2008 JPMorgan Asia Pacific IB Competition

Agenda

Why should LVMH acquire Bulgari?
 LVMH needs to get “HARDER”
 “Polarization” leads the trend
 If winter comes, can spring be far behind?

Valuation

 External & Internal factors Analysis
 Comparable transaction, comparable company & DCF method
Synergy
Execution considerations
 Risk Analysis
 Obstacles for the deal
 Acquisition Means
Why JPMorgan

2

Three “BIG” reasons
why LVMH should acquire Bulgari

 LVMH needs to get “HARDER”

 “Polarization” leads the trend

 If winter comes, can spring be far behind

3

LVMH needs to get “HARDER”
Hard & soft luxury margin, 1998-2008
21%
20%
19%
18%
17%

16%
15%
14%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Hard Luxury Soft Luxury
(Hard luxury includes Bulgari, Richemont, Swatch; soft luxury includes LVMH, Tod’s, Hermes, Gucci, Burberry)

A positive bias for hard vs. soft luxury
 Wealth concentration and aging society should support hard luxury
demand
 Homogenization of the spending patterns of women and men
 High-inflation & wealth store function of jewellery and watches

4

Hard % in revenues, 2007 Pyramid-shaped segments of LVMH
Mean 31.48%
Swatch Jewellery
Richemont Watches
Bulgari Perfumes
Hermes & Cosmetics
Gucci

LVMH Wines & Spirit
Tod's
Burberry
Fashion & Leather goods
0% 50% 100%

Hard % Soft %

LVMH needs to improve its hard/soft balance to have a diversified offer
 Hard/soft ratio is too low: 6.7%/93.3%
 Only 5% of watches market share
 The brands in the top of pyramid——jewellery and watches segments——
are not as strong as star brands of other segments

5

Hard % in revenues, 2007 Sales by region, H1 2008
Mean 31.48%
Swatch Hermes
Richemont Bulgari
Bulgari Swatch
Hermes Richemont
Gucci Gucci

LVMH LVMH
Tod's Burberry
Burberry Tod's

0% 50% 100% 0% 20% 40% 60% 80% 100%
Hard % Soft % Asia Europe US Others

Bulgari has a strong performance in hard market
 World’s third-largest jewellery brand
 High-end position, deriving about 70% EBIT from high-end luxury segment
 Clear exposure to strong growth countries for the hard luxury market

6

“Polarization” leads the trend
Global GDP growth, 01A-09E Sector EBIT margins, H1 04-H1 08
6.0% 20%
5.0% 19%
4.0% 18%
3.0%
17%
2.0%

16%
1.0%
15%
0.0%
01A 02A 03A 04A 05A 06A 07A 08E 09E 14%
H1 04 H1 05 H1 06 H1 07 H1 08
World GDP%

Global growth deceleration is not over
 Global GDP growth deceleration (estimated by World Bank) :
■ +4.7% in 2007
■ +2.5% in 2008
■ +0.9% in 2009
 Luxury brands can defy gravity for a few months, but not through the
cycle
7

LVMH's operating margin and organic growth, 1998-2008E
35% Acquire Chaumet, TAG Heuer, Acquire Calzaturificio
Fendi (51%) Acquire Tod's (3.5%), Acquire Monique
Stroili Oro (70%)
30% Fendi (25.5%) Acquire Feadship,
Acquire Hublot
25% Emilio Pucci,
Fresh
20% Groupe Lampe Berger (16%)

15%

10%
1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008E

Operating Margin Organic Growth

Acquisition is the rare “survived” driver
 Acquisitions make the whole luxury industry stable and orderly
■ Since 1998, LVMH’s acquisitions have frequently coincided with the
subsequent growth
■ Increases occur in the recent case of acquiring Feadship and
Hublot

8

Market cap. of peers, 2008 “Matthew effect” in luxury industry

LVMH  Almost all the mid-cap mono-
Richemont brands were acquired by the
Christian Dior
Hermès larger luxury conglomerates
Harry Winston
PPR
 The sector presents an
ecological characteristics of

Coach
Tiffany “Polarization”
3000
Burberry
Bulgari
Tod's 2000
Hugo Boss
Folli Follie
Mariella Burani
Movado
Antichi Pelletieri
Escada
Damiani S.p.A.
Kenneth Cole
Wolford

0 10000 20000 30000

Market cap. (€m)

9

Market cap. of peers, 2008 The last available mono-brand

LVMH  There are only
Richemont Bulgari, Burberry and
Christian Dior
Hermès Tiffany, according to market
Harry Winston cap between €2000 -3000m
PPR
 Burberry is mainly a soft

Coach
Tiffany player
3000
Burberry
Bulgari
2000
 Tiffany signed a long-term
Tod's
Hugo Boss strategic partnership with
Folli Follie Swatch
Mariella Burani
Movado
Antichi Pelletieri
Escada
Damiani S.p.A.
Kenneth Cole
Wolford

0 10000 20000 30000

Market cap. (€m)

10

If winter comes, can spring be far behind?
P/E & share price, 03-08 P/E among peers, Q3 08
30 Hermes 34.7
25 Tod’s 12.9
5yr average
19.5x LVMH 11.8
20
Tiffany 10.5
15 Bulgari 10

10 Swatch 9.64
Richemont 9.1
5
Burberry 8.5
0
2003 2004 2005 2006 2007 2008 0 10 20 30 40
P/E share price P/E

Lowest P/E since 2003
 A dramatic price plunge with the S&P/MIB index of about 50% in sector
 P/E ratio of Bulgari is below 10x at present, the lowest since 2003
 It is the best moment to buy the big player at such a low cost

11

Bulgari’s sales by region, 1998 Bulgari’s sales by region, 2008

5% Italy 5%
14% US 12%
30% 14%
24%
Europe 42%

27% 27%
Asia

M.East&Others

Undervalued star in Asia
 Asia contributes more than 40% of the sales of Bulgari, while US becomes
less significant
 With the high geographic diversification, the return of Bulgari would be
steadier

12

Bulgari’s stores, Q1 06-Q1 08 Rank of directly operated stores, 07
300 LVMH 2,048
250 Richemont 738
57
200 53 Gucci 484
48
40
150 42
41 Burberry 369
100 Swatch 332
152

119 133
50 Hemes 156
0 Bulgari 149
Q1 2006 Q1 2007 Q1 2008 Tod's 125

Travel retail and wholesale Franchisees Directly operated stores 0 500 1000 1500 2000 2500

Upside potential for revenues
 Still at an expansion stage
 Vertical integration facilitates production
 Bargaining power enhancement
 Diversification to all price points in the jewellery segment, successful
brand leverage to other segments

13

Bulgari’s key fixed costs , 2005-H1 08

€ Million 2005 2006 H1 07 H2 07 2007 H1 08

Amortization 35 38 19.7 23.5 43 25.4

Personnel 164 179 91.7 100 192 106.7

Rentals 44 56 29.9 33.8 64 36.1

Total 243 273 141.3 157.3 299 168.2

Yr to yr change 14% 12% 6% 13% 10% 19%

Cost reduction potential
 In H1 08, cost inflation (+12%) remained well above revenue growth
(+4%):
■ A&P +12.5%
,
■ Personnel costs, +15%
■ Amortization, +29%
 By H2 09, Bulgari’s cost structure will have stabilized

14

Valuation

 Assumptions

 External analysis
■ Sensitivity
■ Region performance

 Internal analysis

 Comparable transaction, comparable
company & DCF method

15

Assumptions

 No dramatic deterioration of the world macroeconomic
environment, while Asia remains reasonable growth

 Steady consumer confidence

 Stable currency and commodity market

 No heavy cash outflow or financial investments

 No significant change in capital structure

 Steady management strategy

16

External analysis - Sensitivity

Sensitivity analysis Conclusion

Impact on  Downturn in revenues while the
1% changes in: Bulgari's global economy is sustaining a

net revenues
recession
World GDP 0.83%  Continuing depreciation of Euro
may alleviate reduction in
US$ to Euro -0.38%
revenues
JPY to Euro -1.09%

17

External analysis - Europe

Organic sales growth, Q2 06-Q2 08 Sector-improve significantly
25%  In Q2 2008 the sales growth
performance improved

20%
significantly
15% Bulgari-weak in Italy
10%  Disappointing revenue trends in
Italy
5%
 Forecasted growth rate in sales
0% of -8% in Italy and 12% in rest of
Q206 Q406 Q207 Q407 Q208 Europe
Average Europe Bulgari Europe

18

External analysis - US

Organic sales growth, Q2 06-Q2 08 Sector-deterioration
60%  Performance in US starts to
50% deteriorate

40%
Bulgari-continuing drop
30%

20%  Continuing drop in sales growth
10% since Q2 07
0%  Forecasted growth rate in sales
Q206 Q406 Q207 Q407 Q208
-10% of -8%
-20%

Average US Bulgari US

19

External analysis - Japan

Organic sales growth, Q2 06-Q2 08 Sector-declination
40%  Demand for luxury goods declines
30%
for a decade

 The sector underperformed in Q2
20%
08
10%
Bulgari-a slow growth
0%
Q206 Q406 Q207 Q407 Q208  Significant organic sales growth
-10%
in Q2 08
-20%  Forecasted growth rate in sales
Average Japan Bulgari Japan
of 4%

20

External analysis – Asia ex-Japan and Others

Organic sales growth, Q2 06-Q2 08 Sector-strong trends
100%  It shows a continuation of strong
80% trends, esp. China

60%  Middle East has a rapid increase
of gross sales of luxury goods
40%

20% Bulgari-large profit space
0%
Q206 Q406 Q207 Q407 Q208
 Strong brand image in China
-20%  Forecasted growth rate in sales of
-40% 16% in Middle East and 19% in rest
Average RoW Bulgari RoW
of Asia ex-Japan, and 16% in
others

21

Internal analysis - Sales

Sales growth at constant currency, Q2 06-Q2 08 Sales in product, 2008
30% Jewellery
8% 3%
25% Watches
42%

20%
20% Perfume
27%
15% Accessory
10% Other
5%

0%
Highlights
-5%  Solid Jewellery sales
-10%
Q206 Q406 Q207 Q407 Q208  Watches' sales growth
has consistently
Jewellery Watches
underperformed

22

Internal analysis – Costs

A & P expenses (€m), Q2 02-Q2 08 Highlights
50
 Store network
45
expansion caused a

40
sharp increase in fixed
35 costs
30
 Consistent advertising
25 and promotion effort
20

15

10
Q206 Q406 Q207 Q407 Q208

23

Comparable transaction valuation : €m [3187, 3208]

Comparable transactions

Multiples FV/Sales (x) FV/EBITDA (x)

Mean for luxury positioning 2.81 14.5

Valuation
Financial Summary (€m) Sales EBITDA
Bulgari S.p.A. 1141.5 219.8
Estimated Firm Value (€m) by FV/Sales FV/EBITDA
Bulgari S.p.A. 3207.6 3187.1

24

Comparable company valuation: €m [1813, 2358]

Comparable company multiples
Comparable companies FV/Sales (x) FV/EBITDA (x) P/E (x)
Tiffany & Co. 1.91 8.6 16.2

Swatch Group AG 2.27 8.9 13.8
Burberry Group PLC 2.04 8.3 14.2
Tod's S.p.A. 1.66 7.2 12.9
Average 1.97 8.3 14.3

Valuation
Financial Summary (€m) Sales EBITDA Net income
Bulgari S.p.A. 1141.5 219.8 165.2
Estimated Firm Value (€m) by FV/Sales FV/EBITDA P/E
Bulgari S.p.A. 2248.8 1813.4 2358.2

25

DCF valuation

Three-stage valuation assumption

Stages Start End Growth

1 2008 2012 Detailed analysis

2 2013 2016 5%

3 2017 ∞ 2%

Free cash flow estimation
€m 2007 2008E 2009E 2010E 2011E 2012E
Operating cash flow 135.5 125.9 284.7 322.1 278.1 288.7
Dep./Amort. 43.2 49.7 57.2 65.7 75.6 86.9
Changes in net working Capital -52 -93.9 48.5 53.8 -20.1 -45.1
Investing cash flow -105.6 -37.2 -38.8 -95.4 -70.2 -85.3
Free cash flow 29.9 88.7 245.9 226.7 207.9 203.4

26

DCF valuation: € 9.01 per share

DCF valuation Sensitivity analysis

WACC 9.10% DCF
Terminal growth
valuation
Mid-term Growth assumed 5.00%

WACC 1% 1.50% 2% 2.50% 3%
Long Term Growth assumed 2.00%
Net Present Value of forecast 7.10% 11.37 11.99 12.73 13.63 14.76
1219.5
Cash Flows (€m)
Net Present Value of Terminal 8.10% 9.67 10.08 10.56 11.13 11.8
1486.5
Value (€m)
9.10% 8.4 8.69 9.01 9.39 9.82
Firm Value (€m) 2706
10.10% 7.41 7.62 7.85 8.11 8.41
Number of Shares (m) 300.3
Share Valuation (€) 9.01 11.10% 6.63 6.78 6.95 7.13 7.35

27

Benefits and limitations

Methods Benefits Limitations

 Reflect supply and demand for
 Rarely directly comparable
Comparable assets
transaction

 Acquisitions trends become  Appropriate multiples change
clear over time
 Truly comparable companies are
 Reflect current market trends
Comparable rare
company
 May not reflect fundamental
 Eliminate influence of inflation
value
 The most sound method of  Sensitive to valuation
valuation assumptions
DCF
 Less influenced by some  Need a long-period financial
conditions statements

28


Synergy

29

Synergy

Strategic improvement Sales by sector, 2007 (€m)
3500
 Family hold to public hold
3000
 Global strategic insight 2500

2000 LVMH
 Enhanced management efficiency 1500
1000 Bulgari
500
0
Revenue enhancement Perfumes and Watches and
Cosmetics Jewelry
 Profitability enhancement of
Bulgari
 More balanced product mix sales
 Stronger distribution networks
 More effective promotion

30

Synergy

Cost reduction Distribution channels, 2008
100%
 Vertical integration
80% license
 Enhanced bargaining power

60%
 Technology coordination wholesale
40%
■ Bulgari has acquired many Swiss
20% retail
watchmakers to support its
0%
business Bulgari LVMH

Others SG&A reduction
 Reduced capital input  Distribution channels sharing
 Tax gains  Labor expense cut
 Management expense per store
down 10.7%

31

Execution considerations

 Risk analysis
■ Macro

■ Liquidity
■ Derivatives

 Obstacles for the deal

 Acquisition means

32

Risk analysis - Macro

Consumer confidence index, 00 -08 Sales growth (%), 04-H1 08
20
120%
15
100%

10
80% 5
60% 0
40% -5 2004 2005 2006 2007 2008H1
20% -10
0% -15 Italy Total
2000

2003

2004

2008
2001

2002

2005

2006

2007

Japan US

Deteriorating macro environment
 Plunging consumer confidence in US and Japan
 Pessimistic economic growth in Italy, with Debt/GDP=104%

33

Risk analysis - Liquidity
Inventory level, 2008 Highlights
Mean 26.8%  Surging inventory
Bulgari
■ Highest inventory level in luxury
Tiffany
Swatch ■ Quick ratio halved from 1 to 0.54
Tod's  Rising financial debt would be big
Burberry
pressure in recent years

Richemont
Hermes  Drying up cash: only 7.9 M on
LV hand after Q3, 30% of total
0% 50% 100% current bank debt
Inventory Other assets

Cash, 04-Q3 08 (€,000) Current bank debt, 04-08 (€,000)
80,000 300,000
70,000
60,000 250,000
50,000 200,000
40,000 150,000
30,000
100,000
20,000
10,000 50,000
- -
2004 2005 2006 2007 2008H12008Q3 2004 2005 2006 2007 2008H1 2008Q3

34

Risk analysis - Derivatives
Gold price ($), 08 Fair value of derivatives (€), 07-08
1050 20,000
1000
15,000
950
10,000
900
5,000
850
0
800
07A 08Q1 08Q2 08Q3

-5,000
750
700 -10,000
Foreign Exchange Commodities
July

Oct
Jan

Apr

Gold hedge derivatives Foreign exchange derivatives
 Accounting retreatment change of  Huge foreign exchange loss
gold hedging in Q1 2008 ■ 20 Million loss on foreign exchange
 Doubted earnings quality in 2008 derivatives in Q3
 Sensitivity analysis
■ 10% unfavorable change causing
€12,869,000 fair value decrease

35

Obstacles for the deal

M&A relation with market (€m) Highlights

18000  Large shareholding in Bulgari’s
16000
14000
family (51.35%)

12000  Less deals in a bear market
10000
8000  Heavy investment - no willingness
6000 to sell
4000
2000  Integration of businesses
0
2001 2002 2003 2004 2005 2006 2007  Legal restrictions
M&A CAC40

36

Acquisition means
Alternative ways The way JP Morgan suggests
 Increase investments in its own  All cash offer
brands of hard luxury sector, such  Funding by bank loan
as TAG Heuer  Funding by debt or equity
■ Pros: issuance
· Self-owned

■ Pros:
· Low risk · More attractive for Bulgari
■ Cons: · Usual acquisition mean
· Low marginal return ■ Cons:
 Put more proportion in emerging · Raising fund in a bear market
countries, such as “BRIC”
■ Pros:
· Large profit space
■ Cons:
· Fierce competition
· Large initial investments

37


Why JPMorgan?

38

Why JPMorgan
“ First class business in the first class way ”

 M & A expert
■ Advised on 268 transactions globally
■ Advised on over $623 billion of M&A transactions
■ Consistent top advisor globally in both number of deals and overall

volume
■ Advised on 5 of the top 10 deals announced globally
■ Geographic presence in over 20 countries
 Full service
■ A leader in investment banking, commercial banking, financial
transaction processing, asset management and private equity.
 Sufficient capital
■ A leading global financial services firm with assets of $2.3 trillion

39

Q&A

40

Appendix

41

Appendix 1 - Work Scope

Pre - Acquisition Acquisition Post - Acquisition

 First round bid  Sign up stake contract and
 Assess the strategic
goal of this deal  Second round bid gain the stake-holding
LVMH  Negotiate stake purchase contract right
 Review descriptive  Obtain authority approval
memorandum  Sign up the contract  Company harmonization

 Strategic assessment &
identification of  Place preliminary indication of interest  Close transaction
synergies  Due diligence
 Valuation of target  Place binding bid  Post-closing adjustments
JP  Risk analysis  Submit marked-up contract
Morgan  Determine the  Reach definitive agreement  Secure financing and cash
acquisition mean  Develop strategy for communication to payment or new share
 Analyzing the other investors issuance
potential bidders  Make public announcement
 Analyzing taxation and
legal procedures

42

Appendix 2 - Sales Breakdown by Product in 2007

Players Watches Jewellery RTW Shoes Perfume Leather Other

Bulgari 27.00% 42.20% 0.00% 0.00% 20.30% 7.70% 2.70%

Richemont 26.00% 50.10% 0.00% 0.00% 0.00% 5.80% 18.10%

Swatch 71.80% 7.10% 0.00% 0.00% 0.00% 0.00% 21.10%

Burberry 0.00% 0.00% 59.90% 0.00% 0.00% 28.90% 11.30%

Hermes 6.40% 5.30% 19.40% 0.00% 7.30% 41.50% 20.00%

LVMH 4.80% 1.90% 4.10% 4.80% 16.60% 22.20% 44.90%

Gucci 4.40% 4.80% 13.50% 12.10% 16.70% 42.40% 6.10%

Tod's 0.00% 0.00% 14.00% 65.00% 0.00% 21.00% 0.00%

Source: advisors’ analysis, Company data

43

Appendix 3 - Sales Breakdown by Region in 2007

Asia Europe US Others

Tod's 15% 75% 10% 0%

Burberry 23% 54% 23% 0%

LVMH 30% 37% 25% 8%

Gucci 33% 47% 19% 1%

Richemont 38% 43% 19% 0%

Swatch 39% 48% 11% 2%

Bulgari 39% 39% 16% 5%

Hermes 41% 41% 15% 3%
Source: advisors’ analysis, Company data

44

Appendix 4 - Sales of Bulgari by Region
€ Million
Regions 2007 2008E 2009E 2010E 2011E 2012E
Italy 141.4 130.7 129.4 132.0 134.6 138.7
% 12% 11% 11% 10% 10% 9%
g -8%- -1% 2% 2% 3%
Rest of Europe 285.9 320.8 336.6 350.3 371.3.7 397.3
% 27% 30% 28% 27% 27% 26%
g 12% 4% 5% 6% 7%
Americas 176.4 155.2 156.8 162.0 172.8 186.6
% 16% 12% 13% 13% 12% 12%
g -12% 1% 4% 6% 8%
Asia 429.3 467.6 509.7 565.7 633.6 722.3
% 39% 41% 42% 44% 45% 47%
g 9% 9% 11% 12% 14%
Japan 231.7 240.9 252.9 265.6 278.9 295.6
% 21% 21% 21% 21% 20% 19%
g 4% 5% 5% 5% 6%
Rest of Asia 197.6 235.3 265.9 303.1 348.6 407.8
% 18% 20% 22% 23% 25% 26%
g 19% 13% 14% 15% 17%
M. East 40.4 46.8 50.5 55.6 61.7 69.7
% 4% 4% 4% 4% 4% 5%
g 16% 8% 10% 11% 13%
Others 17.6 20.4 21.8 23.6 25.7 28.3
% 2% 2% 2% 2% 2% 2%
g 16% 7% 8% 9% 10%
Bulgari 1091 1141.5 1201.8 1290.2 1399.8 1543.0
g 4.6% 5.3% 7.4% 8.5% 10.2%
Source: advisors’ estimates, Company data

Appendix 5 - Balance Sheet of Bulgari
€ Thousands
ASSETS 2007 2008E 2009E 2010E 2011E 2012E
Property, plant and equip. 160,983 172,272 183,423 199,738 215,893 246,684
Intangible assets 118,049 120,000 126,000 132,300 138,915 145,861
Investments and other noncurrent financial 40,236 40,000 40,000 40,000 40,000 40,000
activities
Deferred tax assets 22,750 25,000 25,000 25,000 25,000 25,000
Other non-cur. assets 10,000 10,000 10,000 10,000 10,000 10,000
Non-cur. Financial receiv. 1,368 1,500 1,500 1,500 1,500 1,500
Total non-cur. assets 353,386 368,772 385,923 408,538 431,308 469,045
Inventory 596,116 765,288 713,419 664,888 685,914 734,477
Trade receivables 202,186 206,239 225,411 229,651 249,649 268,779
Other current assets 59,264 68,154 78,377 90,133 103,653 119,201
Current financial assets 12,804 15,000 15,000 15,000 15,000 15,000
Cash and cash equivalent 21,681 20,721 25,087 30,103 36,164 43,594
Total current assets 892,051 1,012,607 1,047,633 1,096,623 1,175,983 1,274,721
Total assets 1,245,437 1,381,379 1,433,556 1,505,161 1,607,292 1,743,766
LIABILITIES
Total non-cur lia. 104,708 107,853 113,991 121,193 127,320 138,599
of which:
Non-current. Financial payable to banks 55,444 50,000 50,000 50,000 50,000 50,000
Total cur.lia 362,267 457,406 448,068 481,829 509,738 556,283
of which:
Trade payables 187,941 201,217 214,782 221,463 239,317 258,427
Current financial payable to banks 116,499 193,391 166,767 191,525 196,169 217,601
Total liability 466,975 565,258 562,059 603,022 637,058 694,883
EQUITY 778,462 715,288 663,419 614,888 635,914 684,477

Appendix 6 – Financial Ratios of Bulgari

2006 2007 2007H1 2008H1 2008E 2009E 2010E 2011E 2012E
Profit margin 14.2% 15.0% 13.1% 12.4% 15.6% 13.4% 14.1% 14.3% 14.4%
Asset turnover 96.8% 99.9% 44.6% 40.7% 91.7% 87.0% 90.0% 93.0% 96.0%
Return on asset 13.8% 15.0% 5.8% 5.0% 14.3% 11.7% 12.7% 13.3% 13.8%
Net debt to equity 5.3% 1.9% 12.2% 33.1% 21.2% 16.3% 17.9% 16.5% 16.6%
Current ratio 274.9% 301.8% 246.2% 196.5% 221.4% 233.8% 227.6% 230.7% 229.1%
Quick ratio 95.4% 104.2% 81.7% 54.3% 54.1% 74.6% 89.6% 96.1% 97.1%
Debt to asset 34.2% 32.0% 37.5% 44.3% 40.9% 39.2% 40.1% 39.6% 39.8%
Equity to asset 65.8% 68.0% 62.5% 55.7% 59.1% 60.8% 59.9% 60.4% 60.2%
Current asset/all 74.2% 74.0% 71.6% 73.4% 73.3% 73.1% 72.9% 73.2% 73.1%
Cash ratio 2.6% 3.6% 1.7% 1.2% 1.5% 1.8% 2.0% 2.3% 2.5%
Current receivable ratio 22.1% 23.1% 22.7% 18.1% 20.4% 21.5% 20.9% 21.2% 21.1%
Current financial ratio 22.4% 20.2% 32.2% 52.4% 42.3% 37.2% 39.7% 38.5% 39.1%
Trade payables 59.8% 59.7% 51.9% 36.1% 44.0% 47.9% 46.0% 46.9% 46.5%
Debt to equity 51.9% 47.0% 60.0% 79.7% 69.3% 64.5% 66.8% 65.7% 66.2%

47

Appendix 7 - Income Statement of Bulgari
€ Thousands
2007 2008E 2009E 2010E 2011E 2012E
Total net revenue 1,090,981 1,141,500 1,201,800 1,290,200 1,399,800 1,543,000
Cost of sales (391,865) (410,900) (432,648) (458,021) (494,129) (544,679)
Total contribution margin 699,116 730,600 769,152 832,179 905,671 998,321
Total contribution margin % 64.10% 64.00% 64.00% 64.50% 64.70% 64.70%
Net operating expenses 534,595 560,477 590,084 629,618 683,102 751,441
Operating profit 164,521 170,123 179,068 202,561 222,569 246,880
Operating profit % 15.10% 14.90% 14.90% 15.70% 15.90% 16.00%
PBT 165,134 177,143 179,068 202,561 222,569 246,880
PBT % 15.10% 15.52% 14.90% 15.70% 15.90% 16.00%
PAT 151,156 159,429 161,161 182,305 200,312 222,192
PAT % 13.90% 13.97% 13.41% 14.13% 14.31% 14.40%
Minority interest 238 200 200 200 200 200
Net profit 150,918 159,629 161,361 182,505 200,512 222,392
Net profit % 13.83% 13.98% 13.43% 14.15% 14.32% 14.41%

48

Appendix 8- Cash Flow Statement (partial) of Bulgari
€ Thousands
2007 2008E 2009E 2010E 2011E 2012E

Cash flows from operating activities


Depreciation, amortization and impairment 43,216 49,698 57,153 65,726 75,585 86,923

Cash flows from operating activities 194,134 219,821 236,221 268,287 298,154 333,803

Cash flows from changes in net working capital -51,954 -93,929 48,504 53,774 -20,051 -45,132

(a) Cash flows from operating activities 135,533 125,893 284,725 322,062 278,103 288,671

Cash flows from investing activities

Purchase of companies (excluding cash/debt
-7,894 -10,000 -10,000 -20,000 -20,000 -10,000
acquired)

Purchases of property, plant and equipment (net of
-86,445 -29,264 -28,812 -75,087 -49,597 -74,343
disposals)

Purchase of intangible assets -29,107 -1,951 -6,000 -6,300 -6,615 -6,946

(b) Cash flows from investing activities -105,618 -37,215 -38,812 -95,387 -70,212 -85,288

Free cash flow = (a)+(b) 29,915 88,678 245,913 226,674 207,891 203,383
49

Appendix 9 – Scenario Analysis for Bulgari
€ Million

2007 2008E 2009E 2010E 2011E 2012E
Base g 8.0% 4.4% 5.1% 6.9% 10.9% 10.2%
EBIT Margin 15.10% 14.90% 14.90% 15.70% 15.90% 16.00%
EBIT 165 170.1 179.1 202.6 222.6 246.9
Optimistic g 8% 7.4% 8.1% 9.9% 13.9% 13.2%
EBIT Margin 15.1% 15.9% 15.9% 16.7% 16.9% 17.0%
EBIT 165 181.5 191.1 215.5 236.6 262.3
Recession g 8% 2.4% 3.1% 4.9% 8.9% 8.2%
EBIT Margin 15.1% 13.9% 13.9% 14.7% 14.9% 15.0%
EBIT 165 158.7 167.1 189.7 208.6 231.5

50

Appendix 10 – Comparable Transactions
Positioni
Date Target Activity Acquiror Firm value FV/Revenue FV/EBITDA
ng
Jun-07 Valentino Fashion Group Fashion house Permira Luxury 4,653.80 2.18 13.9
Feb-07 Jimmy Choo Accessories TowerBrook Capital Luxury 277.4 2.85 N/A
Dec-05 Calvin Klein Jeans Int’l Apparel Warnaco Luxury 240 1.18 N/M
Nov-04 Jimmy Choo Accessories Lion Capital Luxury 143.9 7.38 15.1
Dec-02 Calvin Klein Fashion house PVH Luxury 581.9 3.34 N/A
Mar-02 Gianfranco Ferrè Fashion house IT Holding Luxury 157.5 3.52 N/M
Mar-02 Valentino FashionGroup Fashion house Marzotto Luxury 240.9 1.81 N/A
Nov-01 Donna Karan andGabrielle Fashion house LVMH Luxury 733.8 0.96 9.5
Studio
Nov-01 Fendi Fashion house LVMH Luxury 980.7 3.72 N/A
Sep-01 Increased stake inGucci to Fashion house Pinault-Printemps- Luxury 9,420.60 2.63 12.9
53.2% Redoute
Aug-01 Bruno Magli Footwear and Opera Partecipations Luxury 206.6 2 N/A
leathergoods
Jun-01 Genny Group Apparel and Prada Luxury 120.6 2.73 N/M
accessories
Feb-01 Bottega Veneta Luxury goods Gucci Luxury 151.2 3.16 N/A
Oct-00 Cerruti Fashion house Finpart Luxury 104.7 2.21 N/A
Nov-99 Sergio Rossi Footwear Gucci Luxury 133.1 2.28 17.1
Nov-99 Yves Saint Laurent Groupe Fashion house Gucci Luxury 935.3 1.44 N/A
and perfumes
Nov-99 40% capital increase of Gucci Luxury goods Pinault-Printemps- Luxury 3.970.7 4.2 15.9
Redoute
Oct-99 Fendi Fashion house LVMH-Prada Luxury 1,003.70 3.87 N/A
Aug-99 Jil Sander Apparel Prada Holding Luxury 207.2 1.89 17
Mean 1,127.38 2.81 14.5
51

Appendix 11 – Comparable Companies

Market
cap. FV/Sales (x) FV/EBITDA (x) P/E (x)
(€mm)
2007 2008E 2009E 2007 2008E 2009E 2007 2008E 2009E
Tiffany 3,721 2.13 1.91 1.74 9.5 8.6 7.8 19.8 16.2 14.1
Riche
22,013 2.23 2.10 1.96 9.7 8.9 8.1 14.3 13.5 12.5
mont
LVMH 34,747 2.68 2.56 2.37 10.5 10.1 9.2 16.5 15.3 13.5
Bulgari
2,047 2.05 1.93 1.79 10.8 9.8 8.8 13.7 13.0 12.0
S.p.A.
Swatch 9,564 2.48 2.27 2.11 9.7 8.9 8.1 14.8 13.8 12.4
Burber
2,736 2.34 2.04 1.84 9.7 8.3 7.3 16.7 14.2 12.4
ry
Tod's 1,115 1.8 1.66 1.54 7.7 7.2 6.5 14.4 12.9 11.5
Mean 2.24 2.07 1.91 9.7 8.8 8.0 15.7 14.1 12.6
Median 2.23 2.04 1.84 9.7 8.9 8.1 14.8 13.8 12.4

52

Appendix 12 - DCF Model of LVMH Valuation

€ Million
2007 2008E 2009E 2010E 2011E 2012E
Revenue 16,481 17,656 18,831 20,006 21,181 22,356
Cost of Sales 5,786 6,091 6,396 6,701 7,006 7,311
Marketing and Selling Expense 5,752 6,190 6,645 7,108 7,626 8,130
G&A Expenses 1,388 1,587 1,819 2,068 2,327 2,593
EBIT(excluding depreciation) 3,555 3,788 3,971 4,129 4,222 4,322
Tax 915 980 1,045 1,110 1,176 1,241
Investments 129 132 135 138 141 148
Changes in NWC -474 -128 -264 -317 -261 -205
Free Cash Flow 2,985 2,804 3,055 3,198 3,166 3,138
PV of CF (at Dec,31,2008) 12,022.01 WACC 8.60%
PV of TF (at Dec,31,2008) 41,493.76 Terminal growth 3.00%
Firm value (at Dec,31,2008) 53,515.77 Tax Rate 5.60%

53

Appendix 13 - Synergy Estimates
€ Million

LVMH Bulgari New Firm Synergy
Revenues
PV of CF 77871 5036 82977
PV of TV 295613 4618 304527
NPV 373484 9654 387504 4365
Expense
PV of CF 61896 4257 63430
PV of TV 238464 3879 244865
NPV 300359 8136 308295 200
Taxes
PV of CF 4322 79 4336
PV of TV 16410 75 16489
NPV 20732 154 20825 60
Capital Requirements
PV of CF -401 -335 -769
PV of TV -754 -269 -1943
NPV -1155 -604 -2712 953
Total 53548 1969 61096 5578

Appendix 14 – LVMH’s Acquisition (Partial)
Premium Pre Premium Pre
Final Price Initial Price
Announcement Bid at Bid at
Target Deal Value $ (m) Offered Per Offered per
Date Announcement, Announcement,
Share ($) Share ($)
1 Day (%) 1 Month (%)
28-Dec-98 La Brosse et Dupont SA 165.40 115.27 4.167
12-Jan-99 Gucci Group NV (9.5%) 397.90 70.500 70.50 16.433 69.239
16-Jan-99 Gucci Group NV (19%) 504.38 37.311 37.31 19.763 73.227
Remy Cointreau SA (Krug Champagne
21-Jan-99 House) 176.52
18-Mar-99 Blissworld LLC (Majority%)
6-Apr-99 Michael Kors LLC (33%)
12-May-99 Hard Candy
5-Aug-99 Inter Parfums, Inc. (6.3% Partial Interest)
13-Sep-99 TAG Heuer International SA 825.77 138.777 138.78 8.586 38.042
25-Sep-99 Thomas Pink Holdings Ltd (70%) 49.30
11-Oct-99 Le Tanneur et Cie (33.3%) 3.46
12-Oct-99 Fendi S.r.l (51%) 425.00
20-Oct-99 Chaumet
4-Nov-99 Make Up For Ever (Majority%)
17-Feb-00 Emilio Pucci Srl (67%)
25-Feb-00 Urban Decay LLC
Yves Saint Laurent Groupe SA (Christan
17-May-00 Lacroix Distribution Unit)
28-Sep-00 Mountadam Vineyards (Majority%)
3-Nov-00 Micromania (35%)
14-Nov-00 Tod's SpA (3.5%)
12-Dec-00 Rossimoda SpA (Stake%)
18-Dec-00 Donna Karan International Inc 241.12 10.750 8.50 74.359 51.111
18-Dec-00 De Pury & Luxembourg
18-Dec-00 Gabrielle Studio 400.00
55

Appendix 14 - LVMH’s Acquisition (Partial)(con.)
Premium Pre Premium Pre
Final Price Initial Price
Announcement Deal Value $ Bid at Bid at
Target Offered Per Offered per
Date (m) Announcement Announcement
Share ($) Share ($)
, 1 Day (%) , 1 Month (%)
31-Jan-01 Asprey & Garrard Ltd (10%)
2-Apr-01 De Rigo SpA (5%)
3-Sep-01 Morellato SpA (metal bracelet division) 9.40
13-Sep-01 Acqua di Parma S.r.l (50%)
26-Nov-01 Fendi S.r.l (25.5%) 258.95
25-Jun-02 Imaginarium (40%)
9-Jul-02 Fendi Srl (15.9%) 99.05
2-Dec-02 Groupe Lampe Berger (16%) 149.16
18-Apr-03 Calzaturificio Sergio Rossi SpA (52%)
13-May-03 Fendi Srl (17%)
29-Apr-04 Stroili Oro SpA (70%)
20-Oct-04 Glenmorangie plc 572.26 31.22 12.475 14.050
LVMH Moet Hennessy Louis Vuitton SA
21-Apr-05 (0.92%) 416.67 92.037 130.55 80.995 75.901
17-Jun-05 Mariella Burani Fashion Group SpA (7%)
29-Sep-05 Mariella Burani Fashion Group SpA (Stake%) 26.87 14.093 14.09 -2.784 6.781
28-Apr-06 LV Trading (51%) 0.33
2-May-06 Calzaturificio Monique Srl
13-Jun-06 Fun Fashion Ltd (51%) 5.76
13-Feb-07 Calligaris Holding SpA
17-Mar-07 Hidesign India (Stake%)
16-May-07 Wenjun Liquor Co Ltd (55%)
14-Feb-08 Bodega Numanthia Termes SL 36.43
24-Apr-08 Hublot SA
56

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