LVMH Says Tiffany's Handling of Pandemic Invalidates Deal
By Matthew Dalton
PARIS -- LVMH Moët Hennessy Louis Vuitton SE has shifted its
rationale for why it decided to pull out of its biggest acquisition
The French luxury conglomerate lashed out at Tiffany & Co.
Thursday, saying its $16.2 billion deal to take over the U.S.
jeweler was no longer valid because the company had been mismanaged
during the coronavirus pandemic.
The move ratchets up a confrontation between the two companies
that has drawn in the French government and the White House. On
Wednesday LVMH said it was abandoning the deal because of trade
tensions between France and the Trump administration. The company,
which owns Louis Vuitton, Dior and dozens of other luxury brands,
said it received a letter from the French foreign minister
directing it to delay the purchase as part of France's response to
Washington's threats to impose tariffs on European goods.
On Thursday, LVMH said Tiffany's first-half results and its
outlook for 2020 "are very disappointing, and significantly
inferior to those of comparable brands of the LVMH Group during
"LVMH will be therefore led to challenge the handling of the
crisis by Tiffany's management and its Board of Directors," LVMH
A Tiffany spokesman didn't immediately respond to a request for
On Wednesday LVMH said it considered the letter from the French
government a legally binding order. But a French diplomatic
official disputed that interpretation, saying the letter was only a
request and not binding on the company.
Tiffany immediately sued LVMH in Delaware Chancery Court, saying
the French company was using the letter as a pretext to get out of
a deal that had been signed before the coronavirus pandemic threw
the luxury-goods industry into turmoil.
On Thursday, LVMH cited as evidence of mismanagement Tiffany's
decision to pay its full dividend throughout the pandemic. For the
quarter ending July 31, Tiffany's sales fell 29% compared with the
same period a year ago. That is better than the 45% year-over-year
drop the company reported in the three months ended April 30. The
company posted net profit of $32 million in the July quarter, after
losing $65 million in the previous quarter during the peak of the
pandemic, when its boutiques were closed around much of the
LVMH also said Thursday it plans to seek approval for the merger
from the European Commission, the European Union regulator, despite
insisting that the merger cannot happen. That move aims to refute
one of the arguments Tiffany made in its lawsuit: that LVMH was
dragging its feet in obtaining regulatory approvals as it searched
for ways to get out of the deal.
"The filing in Brussels will take place, as expected, in the
following days and this is simply the result of the planning fixed
by the European Commission, about which Tiffany is completely
aware," LVMH said. "It is legitimate to expect this authorization
will be obtained in October."
Write to Matthew Dalton at Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
September 10, 2020 09:48 ET (13:48 GMT)
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