Tiffany & Co. v. LVMH: Two Luxury Giants at Head

New York— In October of 2019, LVMH sent Tiffany a letter outlining an all-cash takeover bid of over $16 billion with roughly $120 per share, valuing Tiffany at around $14.5 billion. In the same year, the giant fashion conglomerate was valued at around $215 billion. 

For Tiffany, partnering with LVMH guaranteed future growth. It would be an attempt to further develop its short-comings, namely retail experience and brand development. The independent global jewelry house has struggled with poor merchandising and un-even in-store experiences, undermining its strong history of brand recognition and global appeal. LVMH would have greatly benefited Tiffany due to its vast retail portfolio including acquisitions of Fendi, Christian Dior, Givenchy, Marc Jacobs and most recently—Fenty. 

For LVMH, a Tiffany acquisition would have significantly boosted its jewelry sales—changing their 4 percent watch and jewelry division to a quicker moving pace. 

On November 24, 2019 a merger agreement was signed between Tiffany and LVMH providing for the acquisition of Tiffany by LVMH. The Merger Agreement, which has been released by Tiffany, provided for an initial outside date of August 24, 2020, with LVMHC assuming all anti-trust clearance risk and financial risk related to adverse industry trends or economic conditions. 

On September 9, 2020, LVMH announced that they were officially calling off the deal. That same day, Tiffany announced that they had filed a lawsuit in the Court of Chancery of the State of Delaware against LVMH. The lawsuit relates to the Merger Agreement between Tiffany and LVMH on November 24, 2019 seeking an order “requiring LVMH to abide by its contractual obligation under the Merger Agreement to complete the transaction on the agreed terms."

The initial date of August 24, 2020 was extended to November 24, 2020. However, Tiffany states that the “LVMH has still not filed formal requests for antitrust approval in the European Union or Taiwan…all due to LVMH’s concerted efforts to delay or avoid receipt of regulatory approvals…in breach of the Merger Agreement."

In a press release, Tiffany & Co. Chairman of the Board 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."

LVMH has claimed to reserve its rights to challenge Tiffany’s extension, advising Tiffany of the existence of a letter dated August 31, 2020, which LVMH purportedly received from the Ministre de l’Europe et des Affaires Etrangéres. While a copy of the letter has not been provided to Tiffany, an English translation states [that] “the American government has decided to implement an addition customs duty on the important of certain French goods….LVMH should defer the closing of the pending Tiffany transaction until January 6, 2021 in order to support the French Foreign Affairs Minister’s stated intent to ‘take measures in order to dissuade the American authorities from putting these tariff sanctions into effect.”  LVMH has advised Tiffany that it intends to honor the request from the French government and effectively stating that they no longer intent to complete the transaction, despite not having a contractual basis to do so.

The November 24, 2019 Merger Agreement, however, does not excuse LVMH from completing the merger merely because a government minister has requested that LVMH breach the contract. Tiffany believes this latest development “represents nothing more than LVMH’s most recent effort to avoid its obligation to complete the transaction on the agreed terms, not dissimilar from LVMH’s baseless, opportunistic attempts to use the U.S. social justice protests and the COVID-19 pandemic to avoid paying the agreed price for the Tiffany shares." 

In response to the filing of the lawsuit by Tiffany, LVMH announced on Thursday, September 10, plans to sue Tiffany, accusing the jeweler of defamation, misleading shareholder and the mismanagement of the financial fallout from the COVID-19 crisis. 

In a statement, LVMH said, “Tiffany did not follow an ordinary course of business, notably in distributing substantial dividends when the company was loss making and that the operation and organization of this company are not substantially intact. The first half results and its perspectives for 2020 are very disappointing, and significantly inferior to those of comparable brands of the LVMH Group during this period.” 

LVMH has stated they are still proceeding with plans to file for regulatory approvals from Brussels.