LVMH Calls Off Tiffany & Co. Acquisition

After months of speculation that it was backing out of its deal to acquire Tiffany & Co., LVMH announced Wednesday that the deal is off.

The $16.2 billion acquisition, which would have been the biggest deal in the history of luxury goods, was announced in November 2019.

The French conglomerate wrote in a statement that its board tabled the acquisition after considering a letter from the French European and foreign affairs minister that recommended delaying the deal until after January 2021, due to the steep taxes the United States imposed on French products this summer.

The United States instituted a 25% tax on $1.3 billion worth of French products, including cosmetics, soap, and handbags, in July as retaliation for a tax France imposed on American technology companies. Collection on the new French tariffs begins January 6, 2021.

The merger agreement, signed by both LVMH and Tiffany in November 2019, stipulates a closing deadline for the deal “no later than November 24th, 2020.” And LVMH writes, “the Group LVMH will therefore not be able to complete the acquisition of Tiffany & Co.”

Tiffany responded by filing a lawsuit against the company Wednesday in Delaware that aims to force LVMH to go forward with the deal. The suit accuses the conglomerate of deploying “baseless, opportunistic attempts to use the U.S. social justice protests and the COVID-19 pandemic to avoid paying the agreed price for Tiffany shares,” which would suggest Tiffany believes LVMH is using the French government’s request for a delay as a cover for its true motivations for backing out of the deal—the financial risks of taking on Tiffany in the middle of a global pandemic.

Tiffany’s suit seeks “an order requiring LVMH to abide by its contractual obligation under the Merger Agreement to complete the transaction on the agreed terms,” the company said in a prepared statement to investors.

Tiffany & Co. extended the merger closing date to Nov. 24, in deference to LVMH, which it claims was late in completing the filings required by the deal. It’s lawsuit contends that the foot-dragging was purposeful: “LVMH still has not filed formal requests for antitrust approval in the European Union or Taiwan, and applications are still outstanding in Japan and Mexico, all due to LVMH’s concerted efforts to delay or avoid receipt of regulatory approvals in those jurisdictions in breach of the Merger Agreement,” the statement contends.

Roger N. Farah, chairman of Tiffany & Co.’s board, said in the same statement, “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.” He added, “We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction on the agreed terms. But the simple facts are that there is no basis under French law for the Foreign Affairs Minister to order a company to breach a valid and binding agreement, and LVMH’s unilateral discussions with the French government without notifying or consulting with Tiffany and its counsel were a further breach of LVMH’s obligations under the Merger Agreement. ‎Moreover, this supposed official French effort to retaliate against the U.S. for proposed new tariffs has never been announced or discussed publicly; how could it possibly then be an effort to pressure the U.S. into revoking the tariffs? Furthermore, as we are not aware of any other French company receiving such a request, it is all the more clear that LVMH has unclean hands.”

(Photo courtesy of Tiffany & Co.)

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