LVMH Scraps Tiffany Deal; Tiffany Sues

RAPAPORT... LVMH has abandoned its acquisition of Tiffany & Co., citing a trade dispute between the US and France and a disagreement over the timing of the deal.Tiffany has sued LVMH in response, claiming that the luxury giant was in breach of the takeover agreement and intentionally stalled completion so it could renegotiate the $16 billion price.The French government ordered LVMH to defer the takeover until after January 6, 2021, after the US threatened to tax French products, LVMH said in a statement Wednesday. Tiffany earlier requested to extend the transaction's deadline from November 24 to December 31, 2020. But the LVMH board has decided to follow the original November 24 cut-off date that appears in the takeover agreement, and "will therefore not be able to complete the acquisition of Tiffany & Co.," the luxury giant added.Tiffany has filed suit in Delaware, US, it said Wednesday, accusing LVMH of intentionally delaying applications for antitrust clearance, and arguing that the Covid-19 pandemic had not affected companies' ability to obtain such approval. It's seeking a court order requiring LVMH to stick with the terms of the agreement."Tiffany believes this latest development represents nothing more than LVMH's most recent effort to avoid its obligation to complete the transaction on the agreed terms," the jeweler claimed. The move was "not dissimilar from LVMH's baseless, opportunistic attempts to use the US social-justice protests and the Covid-19 pandemic to avoid paying the agreed price for Tiffany shares," it added.Deadline extensionThe contract contained a deadline of August 24 and allowed either Tiffany or LVMH to delay this to November 24 without the other party's consent. As of August 24, LVMH had not filed for antitrust approval in three of the required jurisdictions, prompting Tiffany to make use of that extension, as all other closing conditions were in place. "However, this extended outside date is now less than three months away, and LVMH still has not filed formal requests for antitrust approval in the European Union or Taiwan," Tiffany continued. "Applications are still outstanding in Japan and Mexico, all due to LVMH's concerted efforts to delay or avoid receipt of regulatory approvals in those jurisdictions in breach of the merger agreement."In a further twist, Tiffany found out on Tuesday about an August 31 letter from France's minister of Europe and foreign affairs stating that the US government had imposed an extra customs duty on the import of certain French goods, particularly in the luxury sector, the jeweler said. The letter called on LVMH to push back the closing to dissuade American authorities from implementing the tariffs.But LVMH cannot claim that the acquisition "is in some way inconsistent with its patriotic duties as a French corporation," Tiffany pointed out. The fact that the proposed tariffs have never been discussed publicly - and that no other French company has received such a request from the government - indicates this cannot be a genuine effort to pressure the US into revoking the tariffs, it explained.Tiffany's shares fell 10% in earlier trading Wednesday.Image: Tiffany gift boxes and engagement ring. (Makoto Kojima/Flickr)