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The US designer with a flair for showmanship dedicated his final show for the Parisian luxury brand to "the women who inspire me and the showgirl in every one of them".
Jacobs listed a string of names in a statement from Jane Birkin, Betty Catroux, Catherine Deneuve and Edith Piaf to Liza Minnelli, Kate Moss, Barbra Streisand and Vivienne Westwood.
The designer is wrapping up his 16-year tenure to concentrate on a stock exchange flotation of his own brand, whose value market sources estimate to be "approaching the billion-dollar leagues".
Under his stewardship, Louis Vuitton has become one of the most sought after luxury brands, particularly in the lucrative Asian market, with "Vuitton mania" often prompting round-the-block queues outside the brand's stores.
The news coincided with Jacobs' last show for Louis Vuitton, on the final day of the Paris ready-to-wear collections. A celebration of his work for the label, it was presented entirely in black, just as his first was.
Jacobs and Bernard Arnault, chairman of Louis Vuitton parent company LVMH, confirmed the move to industry journal Women's Wear Daily following months of speculation.
The designer, whose contract had been due to expire at the end of the year, had been in negotiations with Louis Vuitton and LVMH.
The 50-year-old, who pioneered Louis Vuitton's first ever ready-to-wear clothing collection in 1997, was hailed for his innovation at the luxury brand.
"Jacobs leaves Vuitton after a dazzling 16-year run during which he orchestrated the transformation of the leather goods giant from a stodgy luggage house to a global fashion presence," WWD said.
"He pioneered the concept of the fashion-art runway collaboration, first with Stephen Sprouse and later, with several artists including Takashi Murakami and Richard Prince," it said, recalling how the bags he designed with Sprouse and Murakami became global phenomena.
It is understood that the initial public offering (IPO), expected within the next three years, will require Jacobs to be fully focused on his own brand in order to ensure the highest possible valuation.
Mikiko Kashiwagi, owner of a Japanese online clothing firm, said Jacobs would be a huge loss to Louis Vuitton and much missed in Asia.
"It was the most impressive show from Vuitton I've ever seen," she said after Wednesday's show.
"I love Louis Vuitton, it's my favourite brand. The show today looked like a black swan's show... like the swan saying goodbye to leave," she added.
A successor has not been named but Louis Vuitton is understood to have held talks with former Balenciaga designer Nicolas Ghesquiere about succeeding Jacobs as artistic director, sources told WWD earlier.
Frenchman Ghesquiere parted company with Balenciaga in November 2012 following a 15-year tenure.
LVMH owns a substantial stake in the New York-based Jacobs business, and has overseen the introduction of the brand Marc by Marc Jacobs and roll-out of a global network of stores.
Citing market sources, WWD said estimates for the entire Jacobs brand were "approaching the billion-dollar leagues".
Jacobs attended the Parsons School of Design in New York before joining forces with Robert Duffy who has been his business partner since the mid-1980s.
His first collection for the Marc Jacobs brand came in 1986. Marc by Marc Jacobs was introduced in 2001.
The news of his departure came as nine days of ready-to-wear fashion for spring/summer 2014 were due to wrap up in Paris later on Wednesday.
