Tiffany Rebounds After Report LVMH Will Not Seek to Reprice Deal

Tiffany was up big after dropping Thursday on a report that LVMH was reconsidering the $16.2 billion it agreed to pay for the jeweler.
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Shares of luxury jeweler Tiffany & Co  (TIF) - Get Report jumped Friday after Reuters reported that the company's $16.2 billion merger with French luxury goods company LVMH is still on track.

It was reported earlier this week that LVMH CEO Bernard Arnault had been in talks with advisers to figure out a way to lower the agreed purchase price of Tiffany from $135 per share.

But LVMH has decided it will not raise the issue of repricing the deal with Tiffany for now after it considered the legal hurdles involved, sources told Reuters.

Arnault considered arguing that Tiffany's had breached financial obligations under the merger agreement, according to Reuters, but the news service did not provide specifics about those breaches. 

Luxury goods retailer LVMH is worried that the economic crisis triggered by the coronavirus pandemic calls into question Tiffany’s ability to cover its debt covenants, knowledgeable sources told fashion publication WWD.

LVMH, which is the French company behind luxury apparel brands like Louis Vuitton, agreed to buy Tiffany in November, ahead of the global economic slowdown due to the coronavirus pandemic. 

Morningstar analyst Jelena Sokolova remained bullish on the merger in a note Wednesday, despite the reported potential deal renegotiation. 

“We are not changing our fair value estimate of $135 for Tiffany. We continue to believe the transaction makes strategic sense for LVMH, based on our long-term view of Tiffany's fit rather than focus on the short-term issues Tiffany is facing, such as the coronavirus containment measures (which hurt the entire luxury industry) and the protests in the U.S," Sokolova said. 

Tiffany shares rose 8.16% to $123.83 Friday.