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Tiffany & Co to sue LVMH after French retailer cancels multibillion offer

France's LVMH withdraws offer to buy iconic US brand Tiffany & Co.
France's LVMH withdraws offer to buy iconic US brand Tiffany & Co. © Gonzalo Fuente, Reuters
9 min

US jewelry retailer Tiffany & Co on Wednesday said it was suing to enforce a November 2019 merger agreement with LVMH after the French luxury giant called off a planned $16.2 billion (€13.7bn) acquisition, saying the French government had requested a delay to assess the threat of proposed US tariffs.

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The New York-based jewelry company dismissed LVMH’s argument that the French government had requested the closing of the deal – which would have been the biggest of its kind in the luxury goods sector – be postponed, saying it has no basis in French law.

Tiffany also said that LVMH hadn’t even attempted to seek the required antitrust approvals.

“We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction on the agreed terms," said Roger Farah, chairman of Tiffany, in a statement.

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

The takeover would have been LVMH's largest-ever acquisition, enabling it to bolster its presence in the US, currently its second-largest market.

The tussle illustrates the extent to which trade squabbles and the coronavirus pandemic have affected the luxury goods sector.

A letter from Le Drian

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

The French luxury goods giant said it had learnt of a letter from French Foreign Minister Jean-Yves Le Drian directing it to defer the deal in reaction to Washington's threat to levy taxes on French products.

The letter, signed by Le Drian, urged LVMH to delay the closing of the acquisition from November 24 to January 6, 2021, given the threat of additional US tariffs against French products.

LVMH's Financial Director Jean-Jacques Guiony told reporters that the group had been obliged to comply, and given it had no desire to extend negotiations, it could not complete the deal.

A French government source, however, told Reuters the letter had a "political value" and was meant to alert LVMH to the risks of pursuing the deal just as France wrangles with the United States over trade tariffs – but it was not binding.

"They are free to take the letter into account or not," the source said, adding that the French government was not a stakeholder in the firm.

According to a translated version of the letter released by Tiffany, Le Drian urged LVMH to take action at a time when the government was trying to dissuade US authorities from slapping retaliatory tariffs on sectors like luxury goods from January.

"In order to support the steps taken vis-à-vis the American government, you should defer the closing of the pending Tiffany transaction until January 6, 2021," the letter distributed by Tiffany read.

Iconic New York brand

LVMH – which is led by billionaire Bernard Arnault and owns brands such as Louis Vuitton, Dior and Moet & Chandon – had pursued Tiffany, one of the world's most famous jewelry houses, known for its wedding rings and diamonds.

The coronavirus crashed the party however, and Tiffany suffered as lockdowns meant tens of millions of dollars in losses from closed stores.

Arnault had described Tiffany as "an emblematic brand, an American icon that will become a little bit French".

Founded in 1837 and headquartered on Fifth Avenue in New York, Tiffany has long symbolised US sophistication, most memorably in the 1961 film "Breakfast at Tiffany's" starring Audrey Hepburn, based on the Truman Capote novella.

Tiffany, meanwhile, sought to benefit from LVMH's extensive global network and promotional power. It recorded a net loss of $65 million (€55m) during the three months from February to April 2020.

(FRANCE 24 with AFP, AP and REUTERS)

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