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LVMH to Back Out from $16 Billion Tiffany Deal

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by Godfrey Benjamin · 3 min read
LVMH to Back Out from $16 Billion Tiffany Deal
Photo: Depositphotos

LVMH and Tiffany signed a merger agreement in November 2019. However, it has become known that this deal will not have a bright future.

Paris-based Loui Vuitton owner LVMH Moet Hennessy Louis Vuitton SE (EPA: MC) has revealed it will be backing out from its proposed deal with United States jewelry brand Tiffany & Co (NYSE: TIF).

The two companies signed a merger agreement back in November 2019 with November 20, 2020, set as the deadline for the merger to be completed. The French luxury brand outfit LVMH has declared that its decision to pull out of the $16.2 billion deal came after its Board met to review the situation relating to the contemplated investment in light of these recent developments.

One obvious limitation the company cited as the cause of its pull-out is the increased tariff the U.S.-government is levying on French goods. As a result of this, the company noted in a press release that it received a nudging from the French European and Foreign Affairs Minister to delay the acquisition talks until January 6, 2021. This direction further complicated the uncertainties Tiffany and Co reportedly brought in when it requested for the deal to be extended to December 31.

“As a result of these elements, and knowledge of the first legal analysis led by the advisors and the LVMH teams, the Board decided to comply with the Merger Agreement signed in November 2019 which provides, in any event for a closing deadline no later than November 24th, 2020 and officially records that, as it stands, the Group LVMH will therefore not be able to complete the acquisition of Tiffany & Co,” LVMH declared in an official press release.

LVMH to Face Tiffany in a Legal Battle

The move by LVMH will definitely not go without a fight as Tiffany (TIF) has stated its intention to seek legal help in the state of Delaware where it is registered. Through the lawsuit, Tiffany (TIF) aims to force LVMH to follow through with the original terms of the agreement, a move that will see LVMH pay $135 per share.

Roger N. Farah, Chairman of the Tiffany’s Board, 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.”

Analysts have often noted that the price of Tiffany shares billed to be paid by LVMH has become inflated as the COVID-19 pandemic has caused a general plunge in stocks and corresponding value.

“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.” Tiffany’s Chief Executive Officer Alessandro Bogliolo noted, in a bid to clear all sentiments surrounding the company’s overvalued stock in the face of the deal.

The situation has caused a download plunge on the shares of both LVMH and Tiffany. While the French outlet has lost about 0.69% in the past 24 hours, Tiffany closed yesterday’s trading with more than 11% loss, dropping another 8% in the pre-market.

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