LVMH, the world’s biggest luxury group, has agreed to buy Tiffany & Co, in a $16.2bn (£12.6bn) deal.

Renowned US jeweller is well-known for its engagement rings and white diamond necklaces.

Bernard Arnault’s luxury goods empire, which includes brands such as Louis Vuitton, Dior and Moët & Chandon, announced it would pay $135 a share in cash. It said the deal would transform its watches and jewellery division, its latest addition to its 75 key brands known as “Maisons” or houses, reports The Guardian.

Founded in 1837 when Charles Lewis Tiffany opened the first store in downtown Manhattan, Tiffany now has more than 300 stores around the globe. Its flagship store featured in the film Breakfast at Tiffany’s, where Audrey Hepburn’s Holly Golightly character mused “nothing very bad could happen to you”.

Arnault, Europe’s richest man who is the Chairman and Chief Executive of LVMH, said: “We have an immense respect and admiration for Tiffany and intend to develop this jewel with the same dedication and commitment that we have applied to each and every one of our maisons.

“We will be proud to have Tiffany sit alongside our iconic brands and look forward to ensuring that Tiffany continues to thrive for centuries to come.”

Alessandro Bogliolo, the Tiffany & Co chief executive said: “As part of the LVMH group, Tiffany will reach new heights, capitalising on its remarkable internal expertise, unparalleled craftsmanship and strong cultural values.”

LVMH first approached Tiffany in late October with a $14.5bn bid but this was rejected as too low.