Tiffany & Co. and LVMH Moët Hennessy Louis Vuitton have received all of the necessary regulatory approvals in order to move ahead with their $16.2 billion merger, as the European Commission has given the deal the green light. “All regulatory approvals required for the completion of the merger have now been obtained,” New York-headquartered Tiffany & Co. stated in a filing with the Securities and Exchange Commission (“SEC”) on Monday, but the mega-deal is far from done.
The recently-issued approval from the European Commission (which was, as we previously discussed, the expected outcome for a few reasons) comes amid an ugly legal battle between the two luxury giants, with what appeared to be “a really good match” between two well-established names in luxury, as Raphael Pitoun, portfolio manager at CQS New City Equity, characterized the merger in an interview with CNBC in November, swiftly becoming a story of something else: one of alleged renegotiation attempts, Board-level mismanagement, COVID-19 complications, calculated delays, “buyer’s remorse,” and ultimately, a deal-gone-awry.
Accusing LVMH of deliberately stalling the completion of the deal, namely, in connection with the relevant antirust approvals in key markets, such as the European Union, and then ultimately pulling out on the basis of a non-legally binding letter from the French government requesting that it push back the closing date for the merger, Tiffany & Co. filed suit against LVMH on September 9 in the Court of Chancery of the State of Delaware seeking a court order requiring LVMH to “abide by its contractual obligation under the merger agreement to complete the transaction on the agreed terms.”
Under the terms of the merger agreement, “LVMH assumed all antitrust-clearance risk and all financial risk related to adverse industry trends or economic conditions. In addition, LVMH is required to do everything necessary to secure all required regulatory clearances as promptly as practicable,” which Tiffany claimed that as of the date of filing its suit, LVMH had not done. Tiffany further asserted that it is “clear that LVMH is in breach of its obligations relating to obtaining antitrust clearance” from various regulatory bodies, and the New York-based jewelry stalwart asserts that it “refutes” LVMH’s “suggestions that it can avoid completing the acquisition by claiming Tiffany has undergone a material adverse effect 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.”
In response to Tiffany & Co.’s suit, LVMH has argued that the jewelry company’s allegations are “totally unfounded” and “demonstrate the dishonesty of Tiffany in its relations with LVMH.” More than that, it has alleged that the management of the COVID crisis by Tiffany’s management and its Board of Directors fell short, enacting the Material Adverse Effect (“MAE”) clause in the deal, and thereby, putting the validity of the deal at risk.
As Tiffany noted in its SEC filing on Monday, “On September 21, 2020, the Court set January 5, 2021 to begin a four-day trial” in accordance with an expedited hearing schedule.
All the while, citing “sources familiar with the matter,” Reuters reported on Tuesday that Tiffany and LVMH “are in talks to settle their dispute over a $16 billion takeover at a price slightly lower than that initially agreed.” On the heels of an earlier report from CNBC that the they were seeking to settle the legal dispute initiated by Tiffany, Reuters asserts that the parties are negotiating a deal that will see LVMH pay between $131-$134 for each Tiffany share, compared to the $135/share price they initially signed off on in November 2019. CNBC reports that “under the revised terms, LVMH would acquire Tiffany for $130 to $133 per share,” but notes that “the talks remain fluid.”