Tiffany sues LVMH as French luxury giant pulls out of $16bn takeover

Tiffany sues as LVMH backs out of $16bn deal

"LVMH has made clear its real goal is to attempt to renegotiate the merger price to which the parties agreed last November and, barring renegotiation, run out the clock", Tiffany says in its suit, filed in Delaware.

Tiffany filed its lawsuit against LVMH in DE ― the USA state in which the New York-based company is registered ― to force it to complete the deal as agreed past year.

When it struck the deal, LVMH was betting it could restore the luster of Tiffany by investing in spruced-up stores and new collections. (LVMH's original acquisition agreement called for a deadline of November 24 to complete the transaction.). It accused the French group of deliberately stalling completion of the takeover.

LVMH said on Wednesday that France's government asked it to hold off on the deal after Washington threatened to slap taxes on French goods.

Tiffany said Wednesday that it hoped a court based in the U.S. state of DE would hand down a ruling before November 24, and order LVMH "to comply with its obligations and complete the transaction on the agreed terms". "Tiffany expects the same of LVMH".

The luxury industry is facing an unprecedented sales slump as a result of the pandemic, after a decade of stellar growth, with revenue expected to fall by as much as 35 per cent this year.

LVMH said its board had decided not to tie the knot following "a succession of events which undermine the acquisition of Tiffany & Co", notably United States threats to slap tariffs on French products.

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It claims LVMH has breached the merger agreement, dragging its feet on its obligations and searching for loopholes to get out of the acquisition as outlined.

"As it stands, the Group LVMH will therefore not be able to complete the acquisition of Tiffany & Co", it said. "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".

Following LVMH's move to call of the takeover, Tiffany's has chose to sue the French luxury group for resorting to delaying tactics to force a renegotiation of the deal, the Financial Times has reported. He added, "We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction on the agreed terms".

Tiffany said there was no contractual basis for LVMH to honor the request from the French government to refuse to close the transaction until January 6, 2021. ‎Moreover, this supposed official French effort to retaliate against the US for proposed new tariffs has never been announced or discussed publicly; how could it possibly then be an effort to pressure the USA into revoking the tariffs?

"I am sure that you will understand the need to take part in our country's efforts to defend its national interests", France's foreign minister, Jean-Yves Le Drian, wrote to Arnault, according to an English translation of the August 31 letter that Tiffany received from LVMH and that it published yesterday.

"Further, 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, not dissimilar from LVMH's baseless, opportunistic attempts to use the USA social justice protests and the COVID-19 pandemic to avoid paying the agreed price for Tiffany shares", the company stated.

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