Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Tiffany Sues LVMH for Backing Out of $16 Billion Deal

Tiffany Sues LVMH for Backing Out of $16 Billion Deal

The luxury industry’s biggest takeover is unraveling as LVMH moved to call off a $16 billion purchase of Tiffany & Co., which countered with a lawsuit to try to keep the deal on track.


The Louis Vuitton owner said the French government requested that it delay the deal for reasons related to a U.S.-France trade dispute. Tiffany said that LVMH was trying to leverage the protests against police brutality and the Covid-19 pandemic to seek a lower price.

“It’s a governmental order -- we have no other choice,” LVMH Chief Financial Officer Jean-Jacques Guiony said on a conference call, adding that advisers told the company the government has the right to ask for a postponement.

Tiffany shares plunged as much as 11% in New York, while LVMH was little changed in Paris.

French Foreign Minister Jean-Yves Le Drian will discuss a letter he wrote in relation to the proposed acquisition in the coming hours, government spokesman Gabriel Attal said in briefing after a cabinet meeting on Wednesday.



The deal, struck last November, ran into trouble after coronavirus-related lockdowns closed shops around the world and curbed international travel, hitting demand for luxury goods. Adding Tiffany was seen as a way for LVMH Chairman Bernard Arnault to bolster the French company’s U.S. presence by adding an iconic label known for its robin’s egg blue packaging.

Backing away from the deal would be a rare setback for Arnault, who built his empire through a string of acquisitions, amassing a conglomerate encompassing everything from Dior fashions to Dom Perignon Champagne. Tiffany offered a rare opportunity to gain a major brand in the jewelry market, which remains largely splintered among artisanal manufacturers, while other global names like Richemont’s Cartier are already owned by competitors.

Tiffany’s global net sales fell 29% in the quarter ended July 31, though that was an improvement from a 45% drop reported the previous period. The turmoil in the luxury market since the coronavirus spread had prompted speculation that LVMH would seek a lower price.

“It’s a great way out for LVMH,” said Keith Temperton, a trader at Forte Securities, in an email. “They had paid a top-of-the-market price ahead of the pandemic for Tiffany. It’s not surprising, their efforts to wriggle out of it.”


Deadline Extended


The jeweler last month extended the deal deadline by three months, to Nov. 24, prompting LVMH to say it reserved the right to challenge the new closing date

LVMH said the French government had asked the company in the letter to delay the deal beyond Jan. 6, 2021, citing a U.S. move to impose tariffs on goods from France.

In July, the U.S. announced 25% tariffs on French goods including makeup, soap and handbags in a long-running battle over taxing global technology firms. The implementation of the levies was delayed for 180 days while France suspended collection of its digital services tax, which the U.S. says unfairly targets American firms.

LVMH didn’t solicit the government’s letter, Guiony said on Wednesday’s conference call. He also cited Tiffany’s recent performance, and questioned why the jeweler has continued to pay dividends to shareholders during the Covid crisis.

“We weren’t entirely happy with the way the company has been managed and performed over the last few months,” the LVMH CFO said.


Texas Visit


A month before LVMH and Tiffany struck their deal last year, Arnault traveled to Texas to join President Donald Trump at a ribbon-cutting ceremony for a new Louis Vuitton factory, part of a plan by the French tycoon to hedge against trade tensions.

After reaching an agreement to buy the jeweler, Arnault described it as an “iconic, emblematic brand of America, with a great history,” and said the deal would boost its prospects in Europe and China.

The price LVMH originally agreed to pay for Tiffany, at just under 15 times earnings before interest, taxes, depreciation and amortization, rose to almost 18 times Ebitda after the deterioration in the U.S. jeweler’s business amid Covid, according to data compiled by Bloomberg.

An analyst at Mizuho Financial Group Inc. estimated that Tiffany’s shares could fall to $89.32 without the LVMH deal, 27% below Tuesday’s close.


Delaware Suit


The government’s request to LVMH for a delay in the closing date has no basis in French law, Tiffany said.

“LVMH has made clear its real goal is to attempt to renegotiate the merger price to which the parties agreed last November and, barring renegotiation, run out the clock,” Tiffany says in its suit, filed in Delaware.

The reason advanced by LVMH, notably the letter from the government, is “convenient,” but it’s not an “excuse you can invent,” Sanford C. Bernstein analyst Luca Solca said by phone.

LVMH said there’s no termination fee. The price LVMH would have to pay to walk away wouldn’t be a “very material amount,” Solca said.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Severe Heatwave Claims 2,300 Lives Across Europe
Declining Beer Consumption Signals Cultural Shift in Germany
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Massive Anti-Government Protests Erupt in Belgrade
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Hungary's Prime Minister Criticizes NATO's Role in Ukraine
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Hungarian Scientist to Conduct 30 Research Experiments on the International Space Station
NATO Members Agree to 5% Defense Spending Target by 2035
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
International Astronaut Team Launched to Space Station
Macron and Merz: Europe must arm itself in an unstable world
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
×