Tiffany May Agree to Cut Price on LVMH Deal

The “wolf in cashmere” probably has a smile on his fangs.

Ever since LVMH announced its plan to back out of last year’s deal to buy Tiffany & Co., the latter’s lawyers have argued that the luxury conglomerate’s attack of cold feet was mostly a ploy by its chairman Bernard Arnault to renegotiate the price.

Tiffany may win that argument, but lose the war.

On Tuesday, CNBC correspondent David Faber reported that LVMH and Tiffany are in “indirect conversations” that could revise the terms of last year’s $16.2 billion deal. The news comes as the two sides are embroiled in litigation in the Delaware Court of Chancery, where they have accused each other of greed, dishonesty, and mismanagement.

Under the revised terms, LVMH would acquire Tiffany for $130 to $133 per share, a substantial cut from the original price of $135 a share, Faber reported. During last year’s negotiations, Tiffany’s board rebuffed two lower LVMH bids before arriving at the final price.

Faber added the two sides are “looking to get a deal done as soon as possible.” There had been “a discussion of a tender offer, but that is unlikely at this point,” said the report on CNBC.

Faber’s report was followed by similar reports in Reuters and the Financial Times.

The FT reported Tiffany’s main stipulation was that the purchase price remain over $130 a share. It noted that every $1 per share off the original purchase price represents a $120 million savings for LVMH.

“As we have been saying all along, this fight has been one giant price negotiation,” tweeted FT reporter Arash Massoudi. “[N]ow it is time for a face-saving solution for all sides.”

A subsequent Bloomberg report added another detail: Tiffany was willing to settle for $132 a share but wanted some assurance that LVMH wouldn’t back out again.

Any revised deal would likely be subject to Tiffany shareholder approval. The acquisition was originally supposed to close this summer.

Despite the current uncertainty, the deal just cleared one important hurdle: On Tuesday, European Union antitrust authorities gave their blessings to the agreement, which means it has received all required regulatory approvals. Now it’s just a matter of the two sides either making a new deal or fighting it out in court.

Last month, Tiffany filed suit to hold LVMH to the original $16.2 billion agreement. LVMH responded with a countersuit, arguing that the COVID-19 pandemic represents a “material adverse event” that renders the contract null and void.

The case is set to be heard in January.

LVMH’s chief financial officer, Jean Jacques Guiony, previously denied his company was looking to renegotiate the deal.

“There is no article [in the contract] whatsoever that would allow us to renegotiate the price, there is no such thing and it never crossed our mind,” he said on a conference call, as reported by WWD. “We never came to them with any idea that we would renegotiate the price—never.”

LVMH has also argued that a French government edict—supposedly springing from its current tariff war with the United States—would prevent the deal from being consummated within the agreed-upon time frame.

(Image courtesy of Tiffany & Co.)

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JCK News Director

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