Tiffany sues LVMH over merger agreement

Tiffany & Co has filed a lawsuit against LVMH in relation to a prior merger agreement that set out Tiffany’s takeover by the group. 

LVMH had initially announced a “definitive” agreement with the luxury jewellers last November, whereby it outlined its intention to acquire the group for $16bn (£12.5bn), or $135 (£105) per share in cash. 

Under the terms of the Merger Agreement, LVMH assumed all antitrust-clearance risk and financial risk related to adverse industry trends or economic conditions. 

The agreement also provided for an initial outside date of August 24, 2020, while both parties had the option to unilaterally extend the outside date to 24 November.

As of 24 August, LVMH has not yet filed formal requests for antitrust approval, which Tiffany argues is due to LVMH’s “concerted efforts to delay or avoid receipt of regulatory approvals in those jurisdictions in breach of the Merger Agreement”.

Chairman Roger N. Farah said: “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.”

CEO Alessandro Bogliolo said: “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.”

In response to Tiffany’s valid extension of the outside date, LVMH claimed to reserve its rights to challenge Tiffany’s extension. 

In a statement released today (9 September), LVMH also said it had received a letter from the French European and Foreign Affairs Minister which urged the group to defer the acquisition of Tiffany until after January 6th, 2021, following the threat of additional US tariffs against french products.  

LVMH said: “As a results of these elements, and knowledge of the first legal analysis led by the advisors and the LVMH teams, the Board decided to comply with the Merger Agreement signed in November 2019 which provides, in any event for a closing deadline no later than November 24th, 2020 and officially records that, as it stands, the Group LVMH will therefore not be able to complete the acquisition of Tiffany & Co.”

Farah argued: “We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction on the agreed terms. 

“But the simple facts are that there is no basis under French law for the Foreign Affairs Minister to order a company to breach a valid and binding agreement, and LVMH’s unilateral discussions with the French government without notifying or consulting with Tiffany and its counsel were a further breach of LVMH’s obligations under the Merger Agreement.”‎

He added: “Moreover, this supposed official French effort to retaliate against the U.S. for proposed new tariffs has never been announced or discussed publicly; how could it possibly then be an effort to pressure the U.S. into revoking the tariffs? 

“Furthermore, as we are not aware of any other French company receiving such a request, it is all the more clear that LVMH has unclean hands.”