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LVMH scraps $16 billion tie-up deal with Tiffany

LVMH scraps $16 billion  tie-up deal with Tiffany

Luxury giant LVMH called off its planned $16.2-billion acquisition of US jeweller Tiffany on Wednesday and the sparkling tie-up threatened to become a bitter legal battle.
LVMH said its board had decided not to tie the knot following “a succession of events which undermine the acquisition of Tiffany & Co,” notably US threats to slap tariffs on French products.
Spurned Tiffany responded by saying it would take legal action to push the deal through.
The French luxury goods giant said it had learnt of a letter from French Foreign Minister Jean-Yves Le Drian directing it to defer the deal in reaction to Washington’s threat to levy taxes on French products.
It also noted that Tiffany had requested an extension to the closing date of the merger.
Therefore, “as it stands, LVMH will not be able to complete the acquisition of Tiffany & Co.”
Tiffany shot back, saying it would sue LVMH for breaching “obligations relating to obtaining antitrust clearance” for the deal.
It added that terms of the deal allowed either side “to unilaterally extend the outside date to November 24, 2020 if antitrust clearances are the only remaining condition to closing at August 24, 2020.”
“We regret having to take this action, but LVMH has left us no choice but to commence litigation to protect our company and our shareholders,” said board chairman Roger N. Farah.
He insisted that Tiffany was committed to completing the deal.
The takeover would have been LVMH’s largest-ever acquisition, enabling it to bolster its presence in the United States, currently its second-largest market.
LVMH -- which is led by billionaire Bernard Arnault and owns brands such as Louis Vuitton, Dior and Moet & Chandon -- spent more than a month wooing Tiffany, one of the world’s most famous jewellery houses, known for its wedding rings and diamonds.
“Among all luxury segments, jewellery was one of the fastest growing globally (at seven percent annually in 2018), hence generating much interest,” noted Fflur Roberts at Euromonitor International.
“LVMH would have consolidated its position in the US market, and would therefore be aiming for a more balanced geographic portfolio, after concerns were raised over the reliance of the luxury conglomerate upon China, Asia and France” Roberts added.
Arnault had described Tiffany as “an emblematic brand, an American icon that will become a little bit French.”
Tiffany, founded in 1837 and headquartered on Fifth Avenue in New York, has long symbolised US sophistication, most memorably in the 1961 film “Breakfast at Tiffany’s” starring Audrey Hepburn, based on the Truman Capote novella.
Under the proposed deal, LVMH was to have acquired Tiffany for $135 a share in cash.
Tiffany, lagging behind rivals in terms of sales growth in recent years, was to benefit from LVMH’s extensive global network and promotional power.
The New York jeweller said it hoped a court based in the state of Delaware would hand down a ruling before November 24, and order LVMH “to comply with its obligations and complete the transaction on the agreed terms.”
Tiffany was forced to shut stores during coronavirus lockdowns this year and recorded a net loss of $65 million during the three months from February through April.
It had made a profit of $125 million during the same period a year earlier.
But Tiffany’s statement quoted chief executive Alessandro Bogliolo as saying its fundamental strength was clear.
“The company has already returned to profitability after just one quarter of losses,” he noted.
In mid-afternoon trading, LVMH shares were slightly lower at 404.15 euros, while Tiffany’s shares had plunged by 10.4 percent to $109.20 in early New York exchanges.