What is good for LVMH is now good for France

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French presidents were once so drawn to the overhaul of the country’s major companies into larger and supposedly more competitive entities that their tinkering was known as the Industrial Meccano. Governments have become accomplished actors, using state assets and the influence of tight-knit corporate and bureaucratic elites to put their constructs together. But in recent years, the political game, just like its real counterpart, has fallen out of fashion. Rather than playing the game, it seems that French political leaders are now being played.

A French takeover saga, LVMH’s aborted $ 16.6 billion purchase of Tiffany, shows how things have changed. The luxury group owned by French billionaire Bernard Arnault agreed in November to pay the American jeweler $ 135 per share in what would have been the largest luxury transaction ever. But since the pandemic began global jewelry sales, Arnault has tried to renegotiate the terms.

Tiffany alleges that LVMH dragged its feet in filing an antitrust clearance application, in order to delay the transaction and reduce the time on the merger deal. The French group said it still intends to file in time for merger approval before the original November 23 deadline to complete the deal. She submitted her dossier to Brussels on September 21.

Then, on September 9, LVMH revealed that it was withdrawing from the deal following a very convenient request from the French government. The request was formulated in a letter from Jean-Yves Le Drian, the Minister of Foreign Affairs, on August 31, asking LVMH to postpone the finalization of the agreement until January 6 “to support the steps taken towards – opinion of the US government ”. Mr Le Drian was referring to a US threat to impose punitive tariffs on certain French products, including luxury items, by January 6 in retaliation for Paris’ decision to introduce a tax on digital services .

“I am sure you will understand the need to participate in our country’s efforts to defend its national interests,” said Mr. Le Drian in the letter addressed to Mr. Arnault.

Jean Jacques Guiony, chief financial officer of LVMH, said the company was “prohibited” from closing the transaction following the intervention of Mr. Le Drian. He denied that the letter was written at the request of LVMH.

But the letter from the Minister of Foreign Affairs asks more questions than it answers. On the one hand, the original French wording has not been published. LVMH only provided Tiffany’s lawyers with an uncertified translation. He says LVMH “should postpone closing” the deal, which sounds more like an exhortation than a ban. In any event, this does not provide any legal basis to postpone the transaction, which is surprising given the inevitable threat of litigation, which Tiffany immediately sparked.

In repeated trade disputes between the EU and the Trump administration, France has turned over to the European Commission to respond rather than take unilateral action itself, making Mr. Le Drian’s letter d ‘ all the more remarkable. The same is true of the fact that it was the French Ministry of Finance, and not the Ministry of Foreign Affairs, which led the negotiations with Washington on its digital tax plans and its proposals for a broader overhaul of international taxation. companies.

Bloomberg reported that LVMH initially contacted Finance Minister Bruno Le Maire, but was turned away. LVMH said the claim was “completely unfounded”. Why the Trump administration would be particularly unhappy if a French company abandons the purchase of a famous American brand is also a mystery.

The idea that LVMH has no part in this exceptional government intervention does nothing. The company has a good relationship with President Emmanuel Macron. His wife Brigitte is good friends with the Arnault family. Ismaël Emélien, former chief strategist of Mr. Macron and one of his closest collaborators, became a consultant for the luxury group after leaving the Elysee Palace last year. Mr. Arnault, the richest man in France, exerts considerable influence in public life through his philanthropic activities and media assets, including the business daily Les Echos and the lower-end Le Parisien.

More importantly, LVMH is now a national strategic asset. It is by far the largest French company in terms of market value. Its foreign sales are an essential contributor to the country’s external trade balance – and all the more important given the pandemic woes of Airbus, the other French industrial champion, and of the airline sector as a whole. This is a rare segment of French activity with international pricing power and its production cannot easily be transplanted elsewhere.

It’s hard to argue that saving a few billion dollars on an untimely acquisition or helping to wreck it completely is an important national interest for the French state. But what is good for LVMH is now good for France.

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