Tiffany & Co. agreed to accept a lower price when it was bought out by LVMH Moët Hennessy Louis Vuitton SE, ending a dispute between luxury companies that erupted after the coronavirus pandemic rocked the industry.
The companies have come to an agreement on the terms of the new transaction, calling on LVMH to pay $ 131.50 per share for the iconic American jewelry maker, according to people familiar with the matter. This is a drop from the initial price of $ 135 a share, which equates to savings of around $ 430 million for LVMH. This would allow both sides to avoid what would have been an expensive and lengthy trial set to begin in January.
LVMH, with a market value of around $ 200 billion, is one of Europe’s most valuable companies and several times the size of Tiffany. It has a long history of negotiation, including a $ 13 billion move in 2017 to bring the entire French fashion house Dior back under the ownership of LVMH.
But the acquisition of Tiffany represented LVMH’s biggest bet to date under Bernard Arnault, the French billionaire who has been its chief executive and controlling shareholder for three decades. The merits of the deal changed as the pandemic spread around the world in early 2020, forcing Tiffany and other retailers to close stores and drastically cut sales.
The pandemic has particularly hurt demand for luxury brands, as they tend to rely more than other consumer goods on both in-store sales and regular flows of tourists. Bain consultants forecast a 20% to 35% drop in sales in the global luxury industry in 2020.
LVMH said in September it was withdrawing from the deal, using the new rationale for trade disputes between France and the Trump administration. He said he had received a letter from the French Foreign Ministry asking him to delay the acquisition. Many saw this move as an attempt to lower the price. Tiffany chairman Roger Farah said at the time that there was no basis in French law for ordering a company to violate a valid and binding agreement and a French diplomatic official also said that such letter would not be binding.
Tiffany sued LVMH in Delaware Chancery Court to enforce the agreement or obtain damages. This prompted LVMH to strike back, arguing that the US jeweler’s business had been so badly damaged during the pandemic that their take-back agreement was no longer valid. Some legal experts have said LVMH faces a long chance of winning.
It remains to be seen whether in the end it was a good decision for LVMH to challenge the deal – for a rebate of over $ 400 million – given that the next time it tries to make an acquisition, the target could hesitate. , worried that he might also be left at the altar.
Meanwhile, Tiffany shareholders continued to receive a quarterly dividend of 58 cents per share and are expected to get another. LVMH had criticized the company’s decision not to cut its dividend despite losing money during the coronavirus crisis.
The tie-up is the most high-profile deal in the wake of the pandemic, though far from the only one, especially among companies in the hard-hit retail sector. Private equity firm Sycamore Partners sued Victoria’s Secret parent company L Brands Inc. in April, claiming the retailer violated the terms of its merger deal by shutting down stores, firing workers and jumping the payment of the rent. L Brands fought back and both sides eventually agreed to back off the deal.
Mall owner Simon Property Group Inc. has filed a lawsuit to end a $ 3.6 billion deal to buy upscale shopping mall developer Taubman Centers Inc. The companies should face trial the Superior Court of Oakland County, Michigan, next month.
Write to Cara Lombardo at [email protected] and to Dana Cimilluca at [email protected]