LVMH calls off $16 billion Tiffany deal; Tiffany sues

According to trusted industry sources, LVMH Chairman Bernard Arnaulthad asked for assistance from the French government in an effort to pull out of a deal to buy Tiffany.

LVMH denied what a spokesman called “malicious and totally unfounded allegations.”

LVMH moved on September 9 to call off the $16 billion purchase of Tiffany, the luxury industry’s biggest takeover. The jeweler sued the French company to try to keep the deal on track.

The Louis Vuitton owner told international press that the French government had requested that it delay the deal for reasons related to a US-France trade dispute. Tiffany said that LVMH was trying to make use of the protests against police brutality and the Covid-19 pandemic in an attempt to lower the price.

While there’s no breakup fee and LVMH could just walk away without government intervention, doing so could carry risks. Tiffany’s lawsuit in Delaware seeks to uphold the luxury giant’s contract to complete the deal, something LVMH had said previously it would stand by, even as the companies disputed over the timing.

Arnault’s reputation as a dealmaker could also take a hit. The tycoon has built his fortune and luxury empire on decades of successful mergers and acquisitions as he amassed sought-after brands like Christian Dior and Moët &Chandon Champagne. Arnault ranks as the world’s fourth-richest person, even though his fortune is down by close to $20 billion this year alone.

LVMH shares traded 0.5% lower early Thursday in Paris, a day after Tiffany fell 6.4% in New York.

The French company cited a letter by Foreign Minister Jean-Yves Le Drian about the trade dispute with the US as a reason to get out of the deal. It is heard that the billionaire personally reached out to the government to get a state of play on those talks.

Foreign Ministry

Arnault initially sought support from the finance ministry, which rejected him, before going to the foreign ministry. A spokesperson for the French presidency declined to comment, while the ministry of foreign affairs didn’t return requests for comment. The finance ministry declined to comment.

LVMH Chief Financial Officer Jean-Jacques Guiony was asked during a press conference on September 9 if the company sought help from the government. To which he had replied, “You must be joking. Are you seriously suggesting that we procured the letter? I don’t even want to answer that question.”

One of the people said the letter was intended as guidance on the dispute over tariffs, although LVMH said in a statement on September 9 that it “directed” the company to postpone the acquisition until after Jan. 6 and cited it as one of the reasons why the deal wouldn’t be completed.

 Source: Bloomberg