LVMH Pulls Out of $16 Billion Tiffany Deal, Citing US Tariffs

LVMH Pulls Out of $16 Billion Tiffany Deal, Citing US Tariffs

French luxury goods giant LVMH has said it is pulling out of a high-profile deal to buy U.S. jeweller Tiffany & Co.

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

Earlier this year LVMH's board had also reviewed the impact of the COVID-19 pandemic on the Tiffany takeover.

The United States instituted a 25% tax on $1.3 billion worth of French products, including cosmetics, soap, and handbags, in July as retaliation for a tax France imposed on American technology companies.

Tiffany said Wednesday that it hoped a court based in the 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".

Furthermore, the Board noted Tiffany & Co.'s requested to extend the "Outside Date" in the Merger Agreement from November 24th to December 31st, 2020.

Tiffany chair Roger Farah said: "We regret having to take this action but LVMH has left us no choice but to commence litigation to protect our company and our shareholders".

When LVMH agreed to buy Tiffany previous year, its chairman Bernard Arnault called the jeweller an "iconic, emblematic brand of America, with a great history".

"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.

In the lawsuit, Tiffany also refutes LVMH's claim that the transaction is in some way inconsistent with LVMH's "patriotic duties as a French corporation".

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Under the proposed deal, LVMH was to have acquired Tiffany for $135 a share in cash.

While LVMH has received clearance from watchdogs in China and the USA, it has yet to file for regulatory approval in three jurisdictions.

Added Tiffany CEO Alessandro Bogliolo: "The fundamental strength of Tiffany's business is clear".

On Wednesday, Tiffany said it expected its earnings for the fourth quarter of 2020 to exceed those for the same period previous year. Among the ten largest transactions announced since the beginning of the fourth quarter of 2019, this is the only transaction that has not yet formally filed for antitrust approval in the European Union.

The French government put forward it's requesting by writing a letter to LVMH's board.

LVMH said the French government in a letter had asked the company to delay the deal beyond January 6, 2021, citing the US tariff plans.

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.

Tiffany shares plunged about 14 per cent in premarket US trading, while LVMH gave up gains to trade 0.8 per cent lower in Paris.

An analyst at Mizuho Financial Group Inc. estimated that Tiffany's shares could fall to $89.32 without the LVMH deal, 27% below Tuesday's close.

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