LVMH pulls out of $16 billion Tiffany deal, citing tariffs
INTERNATONAL - LVMH said it’s calling off a deal to buy jeweler Tiffany & Co., citing delays to the proposed $16 billion (R267.65 billion) agreement stemming from a US move to impose tariffs on French goods.
The Louis Vuitton owner’s retreat followed Tiffany’s move to push back the closing date from a previously set November target, according to a statement from the French luxury giant.
Tiffany countered with a lawsuit seeking to enforce the merger agreement. The French company has been seeking to leverage the US protests against police brutality and the Covid-19 pandemic to seek a lower price, the jeweler said in a separate statement.
Tiffany shares plunged about 14 percent in premarket US trading, while LVMH gave up gains to trade 0.8 percent lower in Paris.
LVMH’s move follows a collapse in luxury demand after coronavirus-related lockdowns closed shops around the world and curbed international travel. The Tiffany deal, which was struck in November 2019, was seen as a way for the company to bolster a jewelery offering that includes the Bulgari brand by adding an iconic US label known for its robin’s egg blue packaging.
Tiffany’s global net sales fell 29 percent in the quarter ended July 31, though that was an improvement from a 45 percent drop reported the previous period.
“It’s a great way out for LVMH,” said Keith Temperton, a trader at Lombard 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.”
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 in a letter had asked the company to delay the deal beyond Jan. 6, 2021, citing the U.S. tariff plans.
The government’s request has no basis in French law, Tiffany said.
The lawsuit, filed in Delaware, “refutes LVMH’s suggestions that it can avoid completing the acquisition by claiming Tiffany has undergone a material adverse effect or breached its obligations under the merger agreement, or that the transaction is in some way inconsistent with its patriotic duties as a French corporation,” Tiffany said.
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.