Louis Vuitton Sued for Terminating its Deal With Tiffany
Tiffany & Co. sued Louis Vuitton (LVMH) after the latter said that it is unable to complete the USD 16 billion acquisition deal due to a French government’s request and the impact of the COVID-19.
LVMH, the French luxury goods giant is led by billionaire Bernard Arnault. LVMH said its board had received a letter from the French foreign ministry asking it to delay the acquisition of the well-known US jeweller until January 6, 2021.
The said request was made in response to the threat posed by additional US tariffs against French products.
“The French government is certainly very active in defending the French national interest. But this has meant in most cases preventing acquisition of French companies” said Luca Solca, luxury goods analyst at Bernstein.
Therefore it became impossible for LVMH to meet a contractually stipulated deadline of November 24 for completing the acquisition. Furthermore, the group also made it clear that it was not willing to extend the agreement further.
“I am sure that you will understand the need to take part in our country’s efforts to defend its national interest,” France’s Foreign Minister Jean-Yves Le Drian wrote to Arnault. Moreover, it is believed that this advice does not have any binding effect. It is also believed that the pandemic’s global financial effects have made the deal’s price tag less attractive to LVMH.
Luxury Brands in Trouble
The luxury industry is facing an unprecedented sales slump as a result of the pandemic, after a decade of magnanimous growth, with revenues expected to fall by as much as 35% or more this year. It is likely to take around 3 years for revenues to return to 2019 levels, according to consultancy firm Bain.
The Tiffany deal had looked dicey since sources told Reuters in June that Arnault, France’s richest person, and a shrewd businessman, was exploring ways to have price negotiations with the jeweller due to the pandemic. Tiffany had filed a lawsuit in Delaware, US wherein it stated that LVMH reflected a ‘buyer’s remorse’ attitude.
In the retail sector, L Brands Inc agreed to let private equity firm Sycamore Partners walk away from the USD 525 million acquisition of majority stake in its Victoria’s Secret lingerie business, while US malls owner Simon Property Group Inc and Taubman Centers Inc are fighting in a Delaware court over the former’s decision to exit from the USD 3.6 billion acquisition deal of the latter.
These major deals are the latest in a string of mergers and acquisitions that were agreed to before the unprecedented pandemic took off, and have since ended up in Court, where they are being renegotiated or abandoned.
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