Drums of war on the cusp of luxury

A Louis Vuitton store on the Champs-Elysées in Paris, on the 18th CHARLES PLATIAU / Reuters

Many love stories end up in court and that of LVMH and Tiffany, who, more than love was always a project of marriage of convenience, is one of them.

This week, the French luxury giant has counterattacked American jewelry in the same terrain where it revolts against the cancellation of its acquisition by Paris - before a judge - and has not spared in criticism of the "catastrophic" management of the famous brand.

The same one that she saw, only a few months ago, when she announced her merger by absorption, she associated "with the most beautiful love stories."

The pandemic has changed everything, including the marriage between the two most iconic luxury groups.

Moët Hennessy Louis Vuitton (LVMH) announced on Tuesday that it had just filed a counterclaim in the same Delaware court that this month received the first legal offensive from Tiffany after learning of the French giant's decision to cancel the multi-million dollar operation (16.2 billion dollars). ) that was to be completed before the end of the year.

In its judicial response, with which Louis Vuitton sought to counter the "spurious arguments" of its American counterpart with a view to the process set by the court for January 2021, Bernard Arnault's group justifies the reasons for the decline in the purchase, which it supports in both tactical elements - the existence of a clause that would implicitly allow him, he asserts, to wield the pandemic as an emergency exit - and in an almost more devastating accusation of "mismanagement" by New York officials during the crisis caused by the coronavirus.

"Tiffany has not been administered, nor managed, according to the normal course of business," said LVMH, which in its counterclaim reproached the US company for having made a payment "of the highest possible dividend" at a time when it suffered losses and its liquidity was falling sharply.

"No other company in the luxury sector in the world has acted in this way during this crisis (...) mismanagement that demonstrates - always according to the French - a short-term management contrary to the interests of society."

In the acquisition agreement signed in 2019, LVMH maintains that a typical clause was established in this type of business that allows the parties "to renounce to carry out the operation in the event of a significantly unfavorable situation."

No one had the virus in mind, but the virus came and shook the foundations of the world economy.

Tiffany insisted, recalls the French company, that this clause explicitly exclude "some precise elements" such as "cyberattacks, the yellow vest movement or the demonstrations in Hong Kong."

However, he stresses, the North American company did not include among those exceptions a pandemic like the one suffered this year around the world, and that is one of the arguments that Paris now uses to get out of the agreement.

"Tiffany never demanded that such an exception be applied to a health crisis or epidemic, when hundreds of merger agreements made in the last ten years provide for that specific mention," reasons LVMH, for which "the pandemic, whose effects for Tiffany are catastrophic and durable, undoubtedly constitutes a significantly unfavorable situation.

This clause is enough to prevent the operation from being carried out ”, maintains LVMH, which also argues the controversial letter received by the French Minister of Foreign Affairs, Jean-Yves Le Drian, which threatens to turn the battle between the two companies into a non-confusing mess. only business but also diplomatic: as the French group explained when announcing its withdrawal from the purchase, at the beginning of September, the Ministry of Foreign Affairs requested that, in response to the threat of Donald Trump's tariffs, it delayed the corporate operation until - at the earliest— next January 6.

Something that, he argues now before the Delaware court, "makes it impossible to carry out the acquisition of Tiffany before the deadline set in the contract."

Both the French and international press have highlighted LVMH's claim that it did not actively seek the receipt of that letter that has allowed it to take a step back from the merger, but in a recent appearance before the Senate, Le Drian said he wrote the letter "in response to a question from the LVMH group."

Last Sunday, in an interview with

- which also belongs to the Arnault conglomerate - the head of French diplomacy stated that the controversy has acquired "an excessive dimension".

“I spend part of my time talking to the heads of large companies about my appreciation of the international situation (…) I am responsible for France's international relations and it is my duty to preserve French interests (…) It was my role to make known to lVMH my political appreciation of the moment ”, he slipped.

After the cancellation of the acquisition, Tiffany went to court in Delaware - which according to the

has only once accepted the reversal of a merger - accusing LVMH of having delayed regulatory procedures so as not to have to fulfill its commitments and downgrade the purchase price. The latest chapter of the war on the cusp of luxury has yet to be written.