Tiffany-LVMH Deal May Be Saved, Say Analysts

New York—LVMH’s acquisition of Tiffany & Co. is on shaky ground after the French luxury titan announced Wednesday it would be backing out of its agreement to buy the American jeweler.

Tiffany responded with a lawsuit to force LVMH to move ahead with the deal.

In its official statement issued last week, LVMH cited closing date issues after Tiffany requested a second extension and, it said, the French government asked it to hold off until January 2021 because of proposed U.S. tariffs on French luxury goods.

Tiffany countered that LVMH was looking for a way out of the $16.2 billion deal and breached the merger agreement by dragging its feet on securing the necessary regulatory clearances.

The deal recently received regulatory approvals from the Japan Fair Trade Commission and the Mexican competition authority, according to an 8-K filing with the U.S. Securities and Exchange Commission. It is still waiting for clearances from the European Commission and the Taiwan Fair Trade Commission.

LVMH said last week it plans to file its own lawsuit in response.

It called Tiffany’s lawsuit “totally unfounded” and claimed the jeweler had prepared it “a long time ago.”

After looking over Tiffany’s first-half results, the French luxury conglomerate called its perspectives for 2020 “very disappointing and significantly inferior to those of comparable brands of the LVMH Group during this period.”

LVMH said it would be challenging in court the way Tiffany’s management handled the COVID-19 crisis, noting that the company distributed “substantial dividends” when it was losing money and that its operation and organization are not “substantially intact.”

A long legal battle is likely ahead, but analysts aren’t ready to say the deal is off just yet.

“We’re not experts in French foreign affairs but we do believe that Tiffany & Co. remains an attractive target,” wrote Needham analyst Rick Patel in a note to investors shared with National Jeweler.

RELATED CONTENT: What Tiffany’s Acquisition Means for the Jewelry Industry

The COVID-19 pandemic took a toll on Tiffany’s second-quarter results, Patel noted, but highlighted the retailer’s progress in China, digital, and its new product launches.

Those strategic areas were what LVMH was likely drawn to in the first place, he said.

However, the pandemic has led to lower retail valuations across the board, noted Patel.

The deal could go through if Tiffany is willing to lower its initial selling price of $135 per share, he said, but it’s unclear whether the jeweler is willing to do so.

Oppenheimer analyst Brian Nagel