Tiffany shareholders approved the updated agreement for LVMH to acquire the iconic American jeweler, which was announced in October, at a special shareholders’ meeting Wednesday morning, with nearly 99 percent voting in favor of the deal, or more than 88 million votes for the merger and only about 107,000 against it.
“We are very pleased to have reached an agreement with LVMH at an attractive price and to now be able to proceed with the merger,” Roger Farah, chairman of the board of directors of Tiffany, said in October. “The board concluded it was in the best interests of all of our stakeholders to achieve certainty of closing.”
The new deal replaces the original November 2019 agreement with a $131.50 in cash per share purchase price, compared with the original offer of $135 a share. That equals about $420 million in savings for LVMH. The two parties also agreed to settle pending litigation in the Delaware Chancery Court. The final purchase price is $15.8 billion.
After the deal is complete, Tiffany will no longer be a public company, but an indirect wholly owned subsidiary of parent company LVMH, thus joining a stable of luxury brands that includes Dior, Louis Vuitton, Celine, Fendi, Givenchy and Berluti, not to mention jewelers Bulgari, Chaumet and Fred.
The deal gives luxury titan Bernard Arnault a multibillion dollar U.S. company — and one of the few American brands that are truly luxury and wholly control their distribution. Founded in 1837 by Charles Lewis Tiffany and catapulted to a higher plane by his son Lewis Comfort Tiffany, the jeweler has served the wealthy — both old and new money — ever since it was established. As of the end of March, it operated 326 stores worldwide.
LVMH first agreed to buy Tiffany for $16.2 billion late last year in what is the largest acquisition in the luxury space. But that was pre-pandemic.
First, the luxury giant said it couldn’t go ahead with the deal because of a letter from French Foreign Minister Jean-Yves Le Drian, which it described as an order to hold off on the deal given a separate trade spat between Paris and Washington, D.C.
Later, Le Drian told the French parliament that, “My role is to apply, whenever appropriate, the government’s opinion on an assessment of a political nature regarding the management of major international events to come. That is the reason why I replied to a question from the LVMH group, totally in my role.”
That led to the suggestion that LVMH and the company’s chairman and chief executive officer Arnault used its political clout to enlist the French government’s help to get out of the deal.
Tiffany chairman Farah said at the time, “As we are not aware of any other French company receiving such a [governmental] request, it is all the more clear that LVMH has unclean hands.”
Jean-Jacques Guiony, LVMH chief financial officer, responded to the accusations by telling a reporter, “You must be joking. Are you seriously suggesting that we procured the letter? I don’t even want to answer that question. [The letter from the French government] was fully unsolicited.”
The affair got increasingly ugly after LVMH threatened to sue Tiffany for “dishonesty,” mismanagement, poor performance and clauses in the contract.
LVMH also charged that Tiffany’s lawsuit in Delaware was “communicated in a misleading way to shareholders and is defamatory.”
In a brief statement in September, LVMH said it was surprised by the legal action, which it said was “totally unfounded.”
“LVMH will defend itself vigorously. The long preparation of this assignment demonstrates the dishonesty of Tiffany in its relations with LVMH. This action is essentially based on the accusation by Tiffany that LVMH failed to take the reasonably necessary steps to obtain the various regulatory authorities’ approvals in a timely way,” the statement said. “This accusation has no substance and LVMH will demonstrate this to the Delaware Court. On this matter, the filing in Brussels will take place, as expected, in the following days and this is simply the result of the planning fixed by the European Commission, about which Tiffany is completely aware. It is legitimate to expect this authorization will be obtained in October.”
At the same time, the luxury giant added that it was disappointed in Tiffany’s management during the coronavirus crisis, which has put a strong dent in luxury sales and consumer appetite, and vowed to challenge Tiffany and its board of directors on this failing.
“The first-half results and its perspectives for 2020 are very disappointing, and significantly inferior to those of comparable brands of the LVMH Group during this period,” LVMH said in the September statement.
Despite its performance earlier in the year, Tiffany’s earnings shot up in the most recent quarter, which ended Oct. 31, by 52 percent to $119 million, beating out analyst expectations. E-commerce sale were up 92 percent during the quarter.
By October, both parties had reached a truce in order to avoid legal proceedings that would have been harmful on both sides.
Shares of Tiffany & Co. closed up 0.02 percent Wednesday to $131.35 after the news was revealed.
The next question is where LVMH takes Tiffany from here. The American company has a substantial high jewelry business that can go well into the six figures, but also relies heavily on sales of sterling silver pieces by the likes of Elsa Peretti and Paloma Picasso at prices that start at $75 (not counting the $29 deodorant it sells as part of its Tiffany & Love collection). While an instantly recognizable brand worldwide thanks to its blue packaging and Audrey Hepburn and “Breakfast at Tiffany’s,” LVMH is expected to push Tiffany even more upmarket and into more expensive offerings.
Speculation has been rife over the future of Tiffany ceo Alessandro Bogliolo as well as the company’s chief artistic officer Reed Krakoff. Sources have said that Anthony Ledru, LVMH’s executive vice president of global commercial activities based in Paris, is among the top candidates to move into the ceo’s job at Tiffany — where he previously worked as vice president of North America. Meanwhile, LVMH ceo Bernard Arnault’s son Alexandre could also take on a role at his father’s newest bauble. Alexandre Arnault, currently ceo of Rimowa, accompanied his father when the luxury titan toured Tiffany for the first time last December, as did his brother Frederic, who in June was named ceo of Tag Heuer.