Tiffany sues LVMH over aborted deal

The French luxury giant is blaming US tariff threats and regulatory delays

PARIS • The luxury industry’s biggest takeover is unravelling as LVMH moved to call off a US$16 billion (RM67.2 billion) purchase of Tiffany & Co, which countered with a lawsuit to try to keep the deal on track.

The Louis Vuitton owner cited delays related to a US-France trade dispute, while the jeweller said the French giant was trying to leverage the protests against police brutality and the Covid-19 pandemic to seek a lower price.

Tiffany shares plunged about 10% in premarket US trading, while LVMH gave up gains to trade 1% lower in Paris.

The deal, struck in November 2019, ran into trouble after Covid-19-related lockdowns closed shops around the world and curbed international travel, hitting demand for luxury goods. Adding Tiffany was seen as a way for LVMH chairman Bernard Arnault to bolster the French company’s US presence by adding an iconic label known for its robin’s egg blue packaging.

Backing away from the deal would be a rare setback for Arnault, who built his empire through a string of acquisitions, amassing a conglomerate encompassing everything from Dior fashions to Dom Perignon Champagne. Tiffany offered a rare opportunity to gain a major brand in the jewellery market, which remains largely splintered among artisanal manufacturers, while other global names like Richemont’s Cartier are already owned by competitors.

Tiffany’s global net sales fell 29% in the quarter ended July 31, though that was an improvement from a 45% drop reported the previous period. The turmoil in the luxury market since the coronavirus spread had prompted speculation that LVMH would seek a lower price.

“It’s a great way out for LVMH,” said Keith Temperton, a trader at Lombard Forte Securities Ltd, in an email. “They had paid a top-of-the-market price ahead of the pandemic for Tiffany. It’s not surprising, their efforts to wriggle out of it.”

The jeweller last month extended the deal deadline by three months, to Nov 24, prompting LVMH to say it reserved the right to challenge the new closing date.

LVMH said the French government in a letter had asked the company to delay the deal beyond Jan 6, 2021, citing a US move to impose tariffs on French goods.

“It’s a governmental order — we have no other choice,” LVMH CFO Jean-Jacques Guiony said on a conference call yesterday, adding that advisors told the company the government has the right to ask for a postponement.

After that comment, LVMH was forced to cut the call with Guiony short because of a technical problem. It’s scheduled to resume at 3:45pm Paris time yesterday.

In July, the US announced 25% tariffs on French goods including makeup, soap and handbags in a long-running battle over taxing global technology firms. The implementation of the levies was delayed for 180 days, while France suspended collection of its digital services tax, which the US said unfairly targets American firms. — Bloomberg