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Alert: LVMH drops out of Tiffany & Co deal causing the US company to file a lawsuit

The largest deal in the luxury sector, the LVMH acquisition of Tiffany & Co, may have just turned into the most dramatic.

Today the French giant LVMH has warned that it would walk away from the $16 billion acquisition deal with Tiffany & Co. The Group announced:

“The Board took note of a letter from the Minister for Europe and Foreign Affairs who, in reaction to the threat of taxes on French products formulated by the United States, asked the LVMH group to defer the acquisition of Tiffany beyond January 6, 2021. The Board also took note of Tiffany’s request to extend the deadline for completing the agreement from November 24, 2020 to December 31, 2020.

The Board of Directors has decided to adhere to the terms of the Agreement and Plan of Merger concluded in November 2019 which provides for a deadline for the closing of the transaction no later than November 24, 2020 and noted that, as it stands, the LVMH Group would therefore not be able to complete the transaction to acquire Tiffany & Co.”

Tiffany & Co quickly retaliated by announcing that it had filed a lawsuit in the Court of Chancery of the State of Delaware against LVMH. The luxury brand further stated that “the lawsuit seeks, among other things, an order requiring LVMH to abide by its contractual obligation under the Merger Agreement to complete the transaction on the agreed terms.

The lawsuit not only makes clear that LVMH is in breach of its obligations relating to obtaining antitrust clearance, but also refutes LVMH’s suggestions that it can avoid completing the acquisition by claiming Tiffany has undergone a Material Adverse Effect (“MAE”) or breached its obligations under the Merger Agreement, or that the transaction is in some way inconsistent with its patriotic duties as a French corporation.”

Tiffany’s CEO, Alessandro Bogliolo, further 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.”

Tiffany & Co is seeking to expedite the Delaware proceedings to obtain a ruling prior to November 24, 2020 ordering LVMH to comply with its obligations and complete the transaction on the agreed terms.

More details to come as the story develops.