The engagement between Tiffany and LVMH Moët Hennessy Louis Vuitton seems to be off.
The French luxury giant said it likely won’t be able to complete its planned $16.2 billion acquisition of the American jeweler after France’s Minister for Europe and Foreign Affairs asked LVMH to defer the transaction beyond Jan. 6, 2021. The request was made in the wake of a U.S. threat to slap tariffs on a range of French products.
LVMH noted that its original acquisition agreement called for a deadline of Nov. 24 to complete the transaction.
“As it stands, the LVMH Group will therefore not be able to complete the acquisition of Tiffany & Co.,” the French conglomerate said in a brief statement on Wednesday.
It also said LVMH’s board of directors recently met “after a succession of events likely to weaken the transaction to acquire Tiffany & Co.”
Tiffany shot back right away and said Wednesday morning that it had filed suit in the Delaware Court of Chancery to try to compel LVMH to “abide by its contractual obligation under the merger agreement.”
The deal has taken longer than initially expected and concerns have been growing in some quarters that LVMH was slow walking the process of obtaining regulatory approval.
Tiffany noted: “Under the terms of the merger agreement, LVMH assumed all antitrust-clearance risk and all financial risk related to adverse industry trends or economic conditions. In addition, LVMH is required to do everything necessary to secure all required regulatory clearances as promptly as practicable.”
LVMH has not filed official requests for antitrust approval in the European Union or Taiwan, the jeweler said.
Fashion veteran Roger Farah, who negotiated the deal for Tiffany as chairman of the jeweler said: “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. Tiffany is confident it has complied with all of its obligations under the merger agreement and is committed to completing the transaction on the terms agreed to last year. Tiffany expects the same of LVMH.”
Tiffany noted that the COVID-19 pandemic has not prevented other dealmakers from making antitrust filings and that, of the 10 biggest transactions announced since the beginning of the fourth quarter, this is the only deal that hasn’t been formally filed for antitrust approval in the European Union.
Farah also addressed the letter from French authorities, which Tiffany first learned of on Tuesday.
“We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction on the agreed terms,” Farah said. “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?” Farah said. “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.”
Tiffany included the English translation of the letter, addressed to Arnault, that LVMH provided in a filing with the Securities and Exchange Commission.
The minister refers to the duties the U.S. has imposed on French luxury goods in retaliation for the country’s digital services tax.
“Because the implementation of these tariffs may affect France’s external relations, for which my department is responsible, proposed investments by French companies in sectors that could be subject to such sanctions must be reevaluated in light of this new context,” read the letter. “My attention was drawn to the most important current investment, which is your Group’s pending acquisition of Tiffany. In order to support the steps taken vis-a-vis the American government, you should defer the closing of the pending Tiffany transaction until Jan. 6, 2021.”
WWD broke the news on June 1 that the blockbuster deal was looking a lot less certain, citing details of a board meeting specifically to discuss the matter amid a deteriorating situation in the U.S. market, Tiffany’s largest.
Board members of the luxury giant expressed concern at the time about the impact of not only the coronavirus pandemic, which has claimed more than 190,000 lives in America and wreaked widespread economic damage, but also the growing social unrest over racial injustice. There were also question marks about debt covenants, sources told WWD.
The Tiffany deal, secured before the world was upended by COVID-19, was seen as giving LVMH a tighter grip on the lucrative high-end jewelry segment.
Combining the financial firepower of the world’s largest luxury group with the iconic American house — known globally for its robin’s egg-colored packaging and classic engagement ring settings — was seen as creating a more robust competitor to the leading jewelry label Cartier, which belongs to Compagnie Financière Richemont.