LVMH and Tiffany in a Tug of War Over Acquisition
The largest deal in the luxury goods sector has been halted, as powerhouse LVMH Moët Hennessy Louis Vuitton SE stated that it would be pulling out of its planned acquisition of Tiffany & Co.
According to the Wall Street Journal, LVMH claimed that the French Government had sent them a notice to delay the deal, due to reasons related to the trade war between France and the United States.
After already delaying the completion date from August 24 to November 24, this move had executives at Tiffany fed up, to say the least. The New York-based company subsequently filed a decisive lawsuit to enforce the deal, citing that LVMH was using the letter and the ongoing protests as a guise to back out of the merger agreement. Chief Financial Officer Jean-Jacques Guiony responded on a conference call saying that “It’s a governmental order -- we have no other choice,” asserting its legitimacy. Tiffany’s share price effectively fell by 11%, while LVMH’s stock remained relatively unchanged.
Though an acquisition of this size warrants no reason for complacency, it’s hard to say that the principal company feels any remorse given the circumstances. Tiffany’s sales fell by 45% and 29% in the first and second quarters of 2020, respectively. These severe declines during the coronavirus pandemic may have prompted LVMH to question their original pre-pandemic purchase price , which might explain the ambivalence to finalize the deal in the first place.
We’ll wait to see how negotiations play out, but this acquisition seems to be unraveling at a quick pace.
Disclosure: At the time of publication, I have no positions in any of the securities mentioned in this article. I wrote this article myself and it expresses my own opinions. I am not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.