LVMH is in talks to renegotiate its $16.6bn takeover of US jeweller Tiffany, moving closer to salvaging a deal struck shortly before the pandemic and avoiding a courtroom showdown, said four people with direct knowledge of the matter.
The world’s largest luxury goods group had agreed to pay $135-a-share in cash for Tiffany last November, but has been pushing to cut the price since the coronavirus crisis erupted.
An increasingly bitter war of words between LVMH, led by billionaire founder Bernard Arnault, and Tiffany, best known for its engagement rings encased in robin’s-egg blue boxes, escalated last month after the French group threatened to walk away from the deal. That triggered competing lawsuits in the US commercial court in Delaware, setting up the prospect of a bruising courtroom battle.
However, Tiffany recently signalled that it was willing to consider a revised price as long as it was above $130 a share and the French company agreed to close the transaction without further changes, two people said.
LVMH was open to discussing such terms, and the two sides were still in negotiations, said two additional people. One person added that the price would need to fall below $133 for LVMH to agree new terms. Every $1 per share off the original price equates to a saving of about $120m.
Shares in Tiffany rose 1.5 per cent to $124.71 in early New York trading on Tuesday after CNBC reported that “indirect discussions” were under way. The stock climbed further, reaching $129.37, up 5.3 per cent, in early afternoon trading after the Financial Times report on the price range under consideration.
LVMH and Tiffany declined to comment.
LVMH’s planned takeover of Tiffany has become one of the highest-profile deals to founder since the pandemic upended the global economy, including the luxury industry.
LVMH has played hardball with the US jeweller, arguing that its prospects are much weaker now than when the deal was signed in November.
After failing to convince Tiffany to recut the deal, Mr Arnault’s group said in September that it had to abandon the purchase after the French government asked it to delay the transaction following a trade spat between Paris and Washington.
Tiffany subsequently turned to the US legal system to enforce the merger agreement, filing a lawsuit against LVMH that sought to force the French company to respect the original terms of the deal.
Mr Arnault’s group responded in turn, filing a rival suit that claimed Tiffany’s “catastrophic” performance since the pandemic had left it “dismal” prospects for the future.
The bickering between the companies comes as a resurgence of the pandemic in Europe and the US keeps the luxury sector under pressure. Analysts have predicted that the industry’s sales could drop as much as 30 per cent this year, although third-quarter sales from LVMH and Hermès showed glimmers of recovery, driven by Asian and US shoppers.
Analysts said they were uncertain whether the recent resurgence of infections in the US and Europe will slow the rebound.
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