PARIS - The world's biggest luxury goods company is buying US-based jeweller Tiffany & Co for more than $16bn (£12.5bn).

The largest luxury goods deal to date gives LVMH's billionaire owner Bernard Arnault a bigger slice of one of the fastest growing upmarket sectors.

He said Tiffany had an "unparalleled heritage" and fitted with his other brands.

Tiffany has been hit by lower spending by tourists and a strong US dollar.

Tiffany is something of a New York institution and its flagship store is next to Trump Tower on 5th Avenue. The company hit global fame after being featured in the 1961 Audrey Hepburn film Breakfast at Tiffany's.

Founded in 1837, it employs more than 14,000 people and operates about 300 stores.

Mr Arnault has coveted the business since buying the Bulgari brand in 2011 for $5.2bn.

"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 [brand houses]," he said.

LVMH has 75 brands, 156,000 employees and a network of more than 4,590 stores. Its other brands include Kenzo, Tag Heuer, Dom Pérignon, Moet & Chandon, and Christian Dior.

"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," Mr Arnault said.

Known for its signature robin's-egg blue packaging, Tiffany rebuffed LVMH's initial advance made just five weeks ago, arguing it significantly undervalued the company.

The new deal values each Tiffany share at $135 in cash and is higher than the initial offer of $120 a share - which valued the business at $14.5bn.

Tiffany chairman Roger Farah said the board had concluded this deal "provides an exciting path forward with a group that appreciates and will invest in Tiffany's unique assets and strong human capital".

The brand is associated with diamond rings but it has lost its appeal in recent years, according to Fiona Cincotta, market analyst at City Index.

She told the BBC's Today programme that there had been a "changing of the times".

"It's not quite keeping up with millennials so it just needs a re-boost and a re-brand," she said.

LVMH has experience of revitalising businesses. Ms Cincotta cited jeweller Bulgari, which when LVMH took it over in 2011 had operating margins of 8%. These have now widened to 25% on double the sales.

"This something that LVMH appears to do very well... this is a real turnaround story," Ms Cincotta said.