The most iconic jewelry company in the world, one of the emblems of New York City, where it was founded in 1837, becomes French. In fact, the French group Lvmh Moët Hennessy Louis Vuitton SE (usually abbreviated to LVMH), the leading multinational in the luxury sector, based in Paris, bought it.
The acquisition, worth 16 billion dollars, was announced on 25 November 2019 and after a legal battle made up of many back and forth, it seems that the two have finally found an agreement, which ended with a small discount on the purchase price.
The American brand has reconsidered its position about the negotiation and has decided to accept the proposal of 131.5 dollars per share, against the 135 dollars established in the previous agreement, for a final valuation of 15.8 billion dollars (approximately 400 million less than the original 16.2). The boards of directors of both companies approved the terms of the merger, which is expected to officially be closed in early 2021, after it has also been approved by Tiffany & Co.’s shareholders.
Alessandro Bogliolo, Tiffany CEO, said: “We continue to believe in the power and value of the Tiffany brand and the compelling long-term strategic and financial benefits of this combination.” So peace was made for the two luxury brands. But let’s see the details of the discussion.
The dispute began last September, when LVMH announced that the takeover would be off, due to duties imposed by the US on French products. Apparently it was the French government the first one to stand in the way, by sending a letter to the French multinational asking the operation to be delayed beyond 6 January 2021, in view of the possible new duties that the United States could decide to put on French products after the WTO ruling on state aid to Airbus. The coronavirus was the tiebraker in the decision, since it led to a stock trading 13% less than agreed for Tiffany & Co. del 13%. However, many thought that it was a move to renegotiate the terms of the merger.
After the announcement, Tiffany decided to sue LVMH in a Delaware court, arguing that French had no legal basis for the decision and demanding the $16 billion deal to be honored. A note from the company read: “The lawsuit not only clarifies LVMH’s breach of its antitrust compliance obligations, but also rejects LVMH’s indications that the firm may avoid completing the acquisition by claiming that Tiffany has breached its contractual obligations ”.
Then it was the green light of the European Union that brought peace between the two. The Commission announced the approval the acquisition of sole control of Tiffany & Co by Lvmh, declaring that the merger would not cause competition concerns given the moderate market shares, the presence of several third party suppliers and new competitors. This way the deal was on the table again, with negotiations on the price that, as established by the New York brand, could not be less than $130 per share.