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Tiffany & Co sues LVMH for backing out of acquisition agreed in 2019

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Tiffany & Co. has filed a lawsuit against luxury goods conglomerate LVMH for delays to completing a $16.2 billion take over deal.

LVMH says that the French government has asked it to suspend negotiations due to threats of tariffs from the United States.

Tiffany says it prepared to go to court to force the deal to proceed.

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The lawsuit not only makes clear that LVMH is in breach of its obligations relating to obtaining antitrust clearance, but also refutes LVMH’s suggestions that it can avoid completing the acquisition by claiming Tiffany has undergone a Material Adverse Effect (“MAE”) or breached its obligations under the Merger Agreement, or that the transaction is in some way inconsistent with its patriotic duties as a French corporation.

Roger Farah, chairman of Tiffany, says: “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. Tiffany is confident it has complied with all of its obligations under the Merger Agreement and is committed to completing the transaction on the terms agreed to last year. Tiffany expects the same of LVMH.”

Chief executive officer Alessandro Bogliolo, suggests that the financial performance of Tiffany during the covid quarter was behind LVMH’s cold feet on the deal. “The fundamental strength of Tiffany’s business is clear. The company has already returned to profitability after just one quarter of losses, and we expect our earnings in the fourth quarter of 2020 will actually exceed the same period in 2019,” he said.

Mr Farah also hints that LVMH may be just looking to change the terms of the acquisition, rather than pull out. “We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction on the agreed terms,” he said.

LVMH says that much has changed since a heads of agreement was reached late last year. “A succession of events which undermine the acquisition of Tiffany & Co” had prompted the board to review the situation and would not be able to proceed on terms outlined in the 2019 agreement.

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

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Rob Corder

The author Rob Corder