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LVMH and Tiffany Finally Bow Down on $16 Billion Takeover

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by James Lovett · 3 min read
LVMH and Tiffany Finally Bow Down on $16 Billion Takeover
Photo: Depositphotos

LVMH has now decided to settle for a less in its acquisition of Tiffany & Co, ending a bitter dispute that the COVID-19 pandemic triggered.

Today, LVMH, the world’s leading luxury products group, and Tiffany & Co (NYSE: TIF), the global luxury jeweler, agreed to salvage the luxury sector’s biggest-ever deal through modifying certain terms contained in their initial “Merger Agreement.”

In a statement that the companies issued on Thursday, the new takeover price has been revised down from its original $135 value to now $131.5 per share. Therefore, out of the deal, LVMH will benefit from an overall discount of $425 million.

LVMH President and CEO Bernard Arnault suggested that his company would invest in new collections and more stores to restore the luster that Tiffany once possessed.

“We are as convinced as ever of the formidable potential of the Tiffany brand and believe that LVMH is the right home for Tiffany and its employees during this exciting next chapter,” the billionaire businessman cum consummate dealmaker said in a statement the company issued.

According to Reuters, the companies agreed not to change other key terms of the deal that were agreed in November last year. Major details of the new deal first emerged on Wednesday. Tiffany is expected to pay its shareholders a quarterly dividend of $0.58 per share under the revised deal. If Tiffany’s shareholders approve, the transaction will close in early 2021.

‘Luxurious’ Argument Ends In a Deal

Following the new deal, the public, acrimonious war of words that existed between two of the big pins in the worldwide luxury jewelry market ended. Last month, after Louis Vuitton, the owner of LVMH, stated that the company would no longer be able to meet the Nov. 24 deadline of completing the transaction, trouble started concerning the initial deal.

French political intervention to delay acquisition till next year because of an impending new U.S. tariff on French products, as well as dismal performance recording during the coronavirus pandemic period, was the reason the jeweler gave out. Seeking to force the original deal to be respected, Tiffany decided to sue LVMH in a Delaware court, but the court scheduled a hearing in early January.

However, a source who knew details of the deal revealed to Reuters on Wednesday Tiffany approached LVMH to resolve the issue. According to the source, the worsening COVID-19 pandemic in Europe and the United States affecting business conditions was the primary issue that made the two sides to reach a deal.

Later on, Tiffany Chairman Roger Farah came out to state:

“We are very pleased to have reached an agreement with LVMH at an attractive price and to be now able to proceed with the merger. The board concluded it was in the best interests of all of our stakeholders to achieve certainty of closing.”

Deal to Bolster LVMH’s Smallest Business

As a result, a couple of analysts have come out to question why such a bitter between LVMH and Tiffany had just ended up becoming a relatively modest price cut. LVMH, however, argued out that the deal was designed to boost its tiny jewelry and watch division, which Tag Heuer and Bulgari adore and help it expand and strengthen its U.S. presence.

CNBC’s David Faber had on Tuesday reported that a possibility of a slight price reduction existed, and the deal moves to a tenderer offer.

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