US jeweler Tiffany’s planned ভি 1.6 billion takeover of LVMH was put at risk on Wednesday, with the French team saying the deal could not be completed and Tiffany filed a lawsuit to force them to honor the original deal.
Highly-profile examples of how transactions were agreed upon before the coronavirus epidemic in a completely different business perspective have become the largest contracts in the luxury sector.
Over the past several months, LVMH chairman and chief executive Bernard Arnold has sought ways to force the Tiffany board to reconsider the terms of the 135-share deal agreed between the parties in November.
On Tuesday, LVMH’s legal team released a letter to Tiffany stating that it had come from the French government. The request was made in a letter from the French Ministry of Europe and Foreign Affairs and dated 31 August, because of the ongoing trade war with the United States, which requested that Tiffany’s acquisition be delayed.
In the letter, France cited the US move to impose tariffs on certain French industries by January, including luxury goods, in response to the adoption of the Digital Services Tax. The ministry’s letter called on LVMH’s patriotic commitment to counteract US pressure: “I am sure you understand the need to take part in our country’s efforts to protect its national interests.”
LVMH said in a statement on Wednesday that it aimed to abide by the merger agreement with Tiffany, which called for the deal to be completed by November 24. At the request of the French government and a “preliminary legal analysis prepared by the board and LVMH”, the company said that “as it stands, the group LVMH will not be able to acquire Tiffany & Co.”
Tiffany responded by taking legal action against LVMH, claiming that French luxury companies deliberately suspended the no-confidence motion protection process and used other delayed tactics to force the deal to be renegotiated. On Wednesday, Tiffany filed a lawsuit in a Delaware court in Chanjari forcing LVMH to close the transaction by Dec. 24.
Tiffany’s case also claims that LVMH violated its transaction agreement by failing to notify the US company shortly after receiving the letter from the French government.
In her case, Tiffany said: “LVMH’s recent activities have shed light on LVMH’s recognized delays and the true motive behind the missed deadlines. Now it’s pretty clear that LVMH has been running the clock for the past five months to get the early August 242020 “drop-dead” date. . . [as] Tiffany’s strong arm in agreeing to reduce the cost of integrating Tiffany is part of a completely unreasonable effort.
Roger Farah, chairman of Tiffany, said: “We regret the move, but LVMH has no choice but to sue to protect our company and our shareholders.”
Tiffany shares on Wednesday 6. The pre-decline in the US market traded at ১ 111.
According to analysts, the arbitration hedge funds betting on the deal believe Tiffany has a strong legal case.
The stage is now set for a deadly legal battle. This is a far cry from last year when Mr. Arnault praised the American jewelry founded by Charles Lewis Tiffany in 18337 as an “American icon” that fits perfectly into the LVMH brand portfolio.
However, this was before the global demand for luxury products declined due to the coronavirus emergency: analysts predicted a 20 to 35 percent drop in sales this year and a slow recovery that could take three years.
LVMH’s 13 135 share offer late last year represented a 37 percent premium to New York-listed Tiffany’s undisturbed share price, which now looks expensive in the darker side of the luxury. Shares of Tiffany closed at 1 121.81 on Tuesday.
Mr Arnold, dubbed the “Kashmir wolf” for his hardball and unfavorable deal-making tactics, has not spoken publicly about Tiffany in months, leaving lieutenants to answer questions in the process.
Shares of LVMH fell 1 percent in the afternoon trade.
