LVMH’s Acquisition of Tiffany & Co.
Over the past year, the French luxury goods manufacturer, Louis Vuitton Moet Hennessy (LVMH), has been set to wholly acquire the American jewelry producer, Tiffany & Co. Initially agreeing upon a $16.2 Billion price (CNBC), the acquisition looked to be primed for completion in the early stages of 2020. Tiffany’s, known for its Tiffany Blue Box, was seen as a strategic target for LVMH to grow its reach in the luxury goods industry and bolster consumer relationships across different geographical regions.
How did COVID-19 affect the acquisition?
The emergence of COVID-19 across the world in early 2020 almost caused the entire deal to fall through. The pandemic lead to weak performances in Q4 2019 and Q1 2020 of both companies and a growing concern over the poor management at Tiffany (LVMH, Tiffany Quarter Reports). Attributable to these factors, LVMH felt as though the $16.2 Billion price tag on Tiffany & Co. was far too high, leading to several roadblocks popping up in the deal.
Roadblocks in the Deal
LVMH cited a “US-France” trade dispute as being one of the reason for it reneging, stating that government officials sent a letter ordering LVMH to back out of this potential deal (Bloomberg). The circumstances surrounding this letter appear to be somewhat hazy and the timing of this is rather coincidental. To this regard, there have been several objections from Tiffany & Co. as they are not convinced on the authenticity of the governmental order. In response to the growing fear that LVMH will pull out of this deal, Tiffany & Co. file lawsuits against LVMH, hoping to force the deal through (Bloomberg). In another turn of events, LVMH counter-sued Tiffany as they believe the acquirer is legally permitted to walk away from this deal in the event of “material adverse change” to the business (Wall Street Journal). In this, it appeared that the merger had failed.
Resolution
In yet another twist in this transaction, LVMH agreed to a $15.8 Billion (discounted by $425 Million) takeover of Tiffany (USA Today). This represents a major shift in the attitude towards the deal that was held by both the two brands and the public in an almost 180-degree flip. It is interesting to note LVMH’s maneuvering of this deal, seeing as how their intention to follow through with the transaction was evident, however, the tactics used in order to achieve a lower price are somewhat underhanded. At this time, the two companies are settling their legal disputes in Delaware courts and are expected to move forward with the transaction at the slightly discounted price (USA Today).
