Tiffany Shares Fall as LVMH Backs Out of $16 Billion Takeover

Tiffany says it plans to sue French fashion giant French fashion giant LVMH over reneging on its $16 billion takeover.
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Shares of Tiffany (TIF) - Get Report plunged on Wednesday after the famed jewelry company said it plans to sue French fashion giant LVMH Moet Hennessy-Louis Vuitton  (LVMH)  over stalling and then reneging on its proposed $16 billion takeover offer.

In a statement, Tiffany said it has filed a lawsuit in the Court of Chancery of the State of Delaware against LVMH and related entities, alleging the designer-brand fashion icon has intentionally delayed the deal, most recently because of tariff concerns.

The lawsuit follows several delays by LVMH to push back the deal amid the coronavirus pandemic and what LVMH has said have been difficulties in filing for antitrust clearance with European regulators.

It also follows LVMH’s announcement on Monday that it needs to delay the closing to Jan. 6 in order to support the French Foreign Affairs department’s intentions to dissuade the U.S. from imposing tariff sanctions on luxury goods imported from France. 

LVMH on Monday advised Tiffany of the existence of an Aug. 31 letter from the Ministre de l’Europe et des Affaires Etrangéres noting that “the American government has decided to implement an additional customs duty on the import of certain French goods, in particular goods in the luxury sector.”

“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 Chairman Roger Farah said in a statement. “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.”

The deal, which LVMH originally proposed in late November, was expected to close Aug. 24, but was then pushed back to early November.

Meantime, Tiffany late last month posted a return to profitability after a pandemic-induced fiscal first-quarter loss, with its fiscal-second-quarter sales declines decelerating thanks in large part to a rebound in overseas sales, specifically in China.

The better-than-expected results followed reports that LVMH was already looking to take an additional three months to close its $16 billion purchase of the Tiffany.

“The fundamental strength of Tiffany’s business is clear. The company has already returned to profitability after just one quarter of losses, and we expect our earnings in the fourth quarter of 2020 will actually exceed the same period in 2019,” CEO Alessandro Bogliolo said in the statement.

Shares of Tiffany were down 10.2% at $109.36 in trading in New York.