LVMH has offered to buy Tiffany & Co, known for its engagement rings and ties to Hollywood glamour.
The deal comes as the owner of Louis Vuitton and Bulgari seeks to expand in jewellery, one of the fastest-growing parts of the luxury goods market.
In a deal that would beef up its smallest business and give it a slice of the lucrative US market, LVMH said it had approached Tiffany about an unsolicited non-binding offer, but gave no details.
Confirming the move, Tiffany said the offer was worth $120 per share, which would value Tiffany at nearly $14.5 billion and represents a 22% premium over the stock's closing price on Friday.
Tiffany's shares surged as much as 31% to one-year highs at around $130 in New York last night and were on track for their best daily performance since the 182-year-old company's market listing in 1987.
Several analysts said Tiffany might reject the offer to seek a higher price, potentially kicking off a battle for control of the company known for its signature robin's egg blue packaging.
Tiffany has only said for now that it was reviewing the proposal.
LVMH said there was no guarantee that preliminary discussions would result in an agreement. Its shares ended the day down 0.48%, after gaining around 1% earlier.
Analysts said Tiffany could be worth as much as $140-$160 per share, based on the level of premium elicited by the likes of Bulgari.
Although that would be a leap from a price which LVMH already deems generous, a source familiar with the group's approach said.
Tiffany stock is valued at a big discount to the US and European sector as it grapples with falling demand from Chinese tourists and competition from lower-priced rivals such as Denmark's Pandora and Signet Jewelers.
After a recent lacklustre performance - Tiffany's shares have lost almost a third of their value since hitting all-time highs in July last year - shareholders would be likely to welcome a takeover, analysts said.
Tiffany's shares had gained 22.4% so far this year to Friday's close, compared to a nearly 50% increase in LVMH's.
Tiffany, founded in New York in 1837 and made famous by the 1961 movie "Breakfast at Tiffany's" starring Audrey Hepburn, had struggled with falling annual sales and profit since 2015, before a revenue turnaround in 2017.
Under CEO Alessandro Bogliolo, former head of fashion firm Diesel and a Bulgari alumni, the brand has been building up its e-commerce business, and trying to court younger shoppers with more affordable pendants and earrings and new designs.
These include Paper Flowers, a floral jewellery collection made of platinum and diamonds priced between $2,500 and $75,000. Tiffany has also used celebrities like pop star Lady Gaga to front its campaigns.
If a deal emerges, it would be the biggest acquisition to date by LVMH, owned by France's richest man, Bernard Arnault.
LVMH's 2011 purchase of Bulgari transformed its smallest and newest business division, jewellery and watches, which also includes Hublot and Tag Heuer watches.
The luxury goods group, along with rival Kering, is one of the few with the financial firepower for such a deal.
UBS analysts estimate cash-rich LVMH has an M&A treasure chest of some €40 billion.
LVMH has long had Tiffany in its sights as a potentially desirable target, a source at the company had previously said.
Adding the brand would bolster LVMH's exposure to the bridal and diamond category, as well as to US luxury shoppers and Tiffany's overseas network.
Jewellery and watches accounted for 9% of revenue and 7% of LVMH earnings in 2018, about only a fifth the size of its core fashion and handbag business, home to brands like Christian Dior, Givenchy and Louis Vuitton.
LVMH's move on Tiffany stirred speculation about more luxury sector deals, boosting shares in European watch and jewellery companies, including Salvatore Ferragamo, Pandora, Swatch and Richemont.
The potential deal also comes as some of LVMH's watch brands like Tag Heuer have struggled, in part as they try to adapt to the rise of smartwatches.
The sector has been hit hard by turmoil in Hong Kong, a major market for high-end timepieces.
LVMH's rivals, Gucci-owner Kering and Switzerland's Richemont, which owns Cartier, are also bulking up in high-end jewellery.