From marriage to rebellion, LVMH and Tiffany keep breaking up, which makes the audience dumbfounded.
LVMH group filed a formal appeal against Tiffany in the Delaware District Court on Monday (September 28), asking the district judge to approve LVMHs cancellation of its planned $16.2 billion acquisition of Tiffany, the Financial Times reported.
These measures have changed Tiffanys current situation and those of LVMH group when it agreed to the acquisition, which is in flagrant violation of its business obligations in the normal process, and also triggered a clause in the M & a agreement allowing the buyer to withdraw. Therefore, it is legitimate and reasonable for LVMH to stop buying Tiffany.
LVMH even commented on Tiffany in the indictment: unprepared for future challenges, its performance is disastrous and its prospects are bleak.
Tiffany sued lmvh
The latter throws the pot of the French government
On September 9, local time, French luxury giant LVMH group announced that it would terminate its acquisition of American jewelry brand Tiffany. On the same day, angry Tiffany filed a lawsuit against LVMH.
According to Tiffany, previous agreements clearly stated that LVMH should bear all antitrust licensing risks and all financial risks associated with adverse industry trends or economic conditions.
It is understood that in July this year, the U.S. government announced a list of products that imposed a 25% penalty on US $1.3 billion French goods in retaliation for Frances digital service tax on US technology giants. However, the United States also said at that time that it would not levy taxes temporarily to allow time for the settlement of disputes. The U.S. government is blocking international negotiations on cross-border taxation of digital giants, and Europe should be prepared to push ahead with European taxes if a global agreement cannot be reached by the end of the year, Reuters said.
At present, LVMH and Tiffany have their own opinions. The final outcome of this breakup drama depends on how the judge decides.
Previously, LVMH applied to Delaware courts to extend Tiffanys appeal by six to seven months. But last week, judge Joseph slats agreed that Tiffany would move the court forward and set it for January 2021, which will last four days.
As Tiffanys operation is currently subject to many restrictions of the acquisition transaction, including the use of funds and other aspects, if LVMH successfully delays the completion time of the transaction, it will bring a lot of destructive impact on Tiffanys business.
The worlds largest luxury M & a failed
Is the epidemic the main culprit?
In fact, the series goes back to November 2019.
At that time, after several months of market news, LVMH and Tiffany announced on the same day last November that the two companies had signed a final agreement that LVMH would purchase Tiffany at a cash price of $135 per share, totaling $16.2 billion.
Looking back on the past acquisition process of LVMH, the transaction price of RMB 16.2 billion not only exceeded the US $7 billion of Diors acquisition in 2017, becoming the largest acquisition transaction of LVMH group so far, but also the most entrenched acquisition case in the history of global jewelry industry.
Tiffanys share price once soared because of the marriage with the worlds largest luxury group. Not only did it soar 30% on the day it received the takeover offer on October 28, but after the formal signing of the acquisition agreement, the companys share price rose by more than 40% until the outbreak of the European and American epidemic this year, reaching a historical high of $133.
Originally, the worlds largest luxury M & A should be happy, but the epidemic has made the plot turn sharply.
The black swan incident has brought a huge impact on the global retail industry. Although the luxury industry is a lean camel than a horse, it does not go bankrupt like a large number of small and medium-sized retail enterprises or shops, but its revenue has also suffered a wave of sharp drop.
According to the financial report of the first half of 2020 released by LVMH group, in the first half of 2020, the net profit of LVMH plummeted by 84% to 522 million euro, the operating profit by 68% to 1.671 billion euro, and the sales volume by 28% to 18.793 billion euro. All LVMH brand business lines were affected, among which wristwatch and jewelry line were hit the most, with a year-on-year decrease of 39%. The fashion and leather goods department was relatively less affected, but the decline was also 24%.
So is Tiffany. In the first half of 2020, Tiffanys overall sales fell nearly 36%, and net profit fell 77% to $32 million from the same period last year.
In the second quarter of 2020, Tiffanys global net sales decreased by 28%, but compared with the loss of US $65 million in the first quarter of 2020, Tiffany has rapidly turned from loss to profit in the second quarter.
This has benefited from the rapid recovery of the Chinese market. In terms of the whole second quarter, Tiffanys performance in mainland China was far better than that in other regions, with a year-on-year growth of nearly 80%. Chinas sales environment has recovered and improved in April, and the growth rate in May was more than 90%.
The growth of the Chinese mainland market and global e-commerce business has accelerated our return to the quarterly profitability, and our global sales trend has been strengthened in August, said AlessandroBogliolo, chief executive of Tiffany. Therefore, if this momentum can be maintained, Tiffanys forecast that the second half of the year will remain profitable is not groundless.
The reasons for LVMHs announcement of stopping the acquisition of Tiffany are: on the one hand, LVMH is more cautious in the use of funds due to the impact of the epidemic, and it needs time to consolidate its own brand; on the other hand, although the sales of Tiffany have recovered rapidly since the outbreak, the share price of Tiffany has dropped from a high level to around $110, so the total contract price will also be reduced from $16.2 billion to $13.3 billion At $200 million, LVMH may not be willing to pay this high premium in the face of a cold winter in the luxury goods industry.