THE WHAT? Tiffany has announced it is to sue LVMH over the deliberate stalling of its takeover deal, worth $16bn, according to a report by the Financial Times.
THE DETAILS According to a lawsuit filed at the Delaware Court of Chancery, LVMH has used delay tactics in order to force a renegotiation of the deal, which was agreed before the financial hit of COVID-19 took place.
While LVMH has received clearance from watchdogs in China and the U.S., it has yet to file for regulatory approval in three jurisdictions. LVMH stated it had received a letter from the French government asking for a delay of the deal until January to avoid tariffs imposed by the Trump administration.
Following on from this, LVMH released a statement that read, “Given these elements and the initial legal analysis prepared by the board and LVMH, the board has decided to respect the terms in the merger agreement signed in November 2019 that lays out a deadline for the deal to close by November 24, 2020. As a result, LVMH will not be able to complete the acquisition of Tiffany & Co.”
However, Tiffany has accused the company of deliberately stalling proceedings in order to force a renegotiation, with the resulting lawsuit said to be looking to force LVMH to complete the deal by the 24th November. The lawsuit also accuses LVMH of failing to inform it of the French government’s letter as soon as it was received.
The lawsuit reads, “LVMH’s recent actions shed light on the true motives behind LVMH’s contrived delays and missed deadlines. It is now unmistakably clear that LVMH has been running out the clock for the last five months in an effort to get to the initial August 24 2020 “drop-dead” date . . . [as] part of an entirely improper effort to strong-arm Tiffany into agreeing to reduce the merger price.”
THE WHY? The news follows the recent mid-August curveball in the buy-out, with LVMH stating that it still had the right to exit the deal due to a material effect clause that gives the buyer a get-out-of-jail free card if the selling company reports a sharp drop in revenue and profit. Tiffany countered this stating it was in line with its peers and still expects to continue on a growth trajectory.
Roger Farah, Tiffany Chairman, said: “We regret having to take this action but LVMH has left us no choice but to commence litigation to protect our company and our shareholders.”