Louis Vuitton group cancels Tiffany purchase

A Tiffany jewel in a shop window of the firm in Paris last November.Gonzalo Fuentes / Reuters

The French luxury giant Moët Hennessy Louis Vuitton (LVMH) has decided to cancel the purchase of the American chain of jewelry stores Tiffany due to a "succession of events" that have "weakened the transaction", as reported by the company on Wednesday. that Tiffany has reacted with a lawsuit in the US As LVMH has explained, the French Ministry of Foreign Affairs had asked the company, in response to the threat of tariffs made by the United States, to delay the purchase of Tiffany until 6 January 2021 at least.

Likewise, the US company itself has requested to extend the deadline for formalizing the purchase until December 31.

The intention of the French Executive, according to the letter, is "to take measures to dissuade the US authorities from implementing the tariffs."

“Taking these elements into account, and having taken note of the legal analyzes carried out by LVMH, the board of directors has decided to adhere to the terms of the November 2019 merger agreement that indicate a deadline for the closing of the transaction of, as late, on December 24, 2020, so, in this way, the LVMH group will not be able to complete the transaction to acquire Tiffany, ”the company explained.

The acquisition has suffered a series of delays since it was announced at the end of 2019. Tiffany itself requested in August to extend the expiration period of the purchase until the end of November.

This is in addition to the new request to extend the deadline until December 31.

During the summer, LVMH warned that it was not considering buying Tiffany shares on the market.

The acquisition was made public in November for a total amount of 16,200 million dollars (13,776 million euros).

After knowing the cancellation of the acquisition, the shares of LVMH have fallen 1.64% on the Paris Stock Exchange.

The impact on the price of Tiffany has been more pronounced: its titles have started the session in New York with a decrease of almost 9%.

Tiffany lawsuit

At the same time that LVMH informed its shareholders that it was abandoning the purchase of the jewelery chain, Tiffany itself has reported that it has filed a legal action before the United States Justice to force the French firm to complete the acquisition.

The lawsuit, filed before a court in Delaware (United States), accuses LVMH of not having fulfilled its obligations to obtain the approval of the Competition authorities and “refutes” the idea of ​​the French firm that “it can avoid completing the acquisition".

Tiffany argues that, as of August 24, LVMH had not applied for the Competition authorization in the three necessary jurisdictions.

According to the jewelry chain, the request has not yet been sent to the authorities of the European Union and Taiwan.

Also, the process is still underway in Japan and Mexico.

Tiffany attributes this to LVMH's "efforts" to delay or prevent the receipt of regulatory approvals to break the merger agreement.

"We regret having to do this, but LVMH has left us no choice but to initiate litigation to protect our company and our shareholders," said the president of the US company, Roger Farah.

His company, he says, has fulfilled "all its obligations."

Tiffany has rejected the argument of the letter sent by the French ministry, assuring that a government order for a company to break a legal and binding contract is not supported by French law.

Farah added that LVMH's unilateral dialogue with the French Executive is also a violation of the merger agreement and that the government's decision to respond to US tariffs had never been made public before.