If LVMH and Tiffany dont get married, will there be a turning point?

category:Finance
 If LVMH and Tiffany dont get married, will there be a turning point?


In early September, LVMH abandoned plans to buy Tiffany. At the time, LVMH said in a statement that it was unable to complete the Tiffany acquisition as is the case..

LVMH said there were two main reasons for the withdrawal: first, Tiffanys request to postpone the completion date from November 24 to December 31. Second, the French government wrote to postpone the deal because the US government threatened to impose tariffs on France.

Faced with LVMHs reneging move, Tiffany sued LVMH on September 9 for failing to complete the acquisition within the agreed time. Tiffany pointed out that among the ten largest M & A cases concluded in the fourth quarter of 2019, only LVMHs acquisition of Tiffany has not submitted formal antitrust review application to the EU, and all other nine transactions have submitted applications between March and July this year. Therefore, Tiffany sued LVMH group for deliberately delaying the anti-monopoly approval process, making the acquisition difficult to complete as promised.

In the lawsuit on the 28th, LVMH said that significant adverse effects had occurred, that is, the new crown pandemic. The company described Tiffany as a company with poor management and gloomy prospects. LVMH detailed many examples of mismanagement in a court paper. Tiffany, for example, pays shareholders as much dividends as possible when the company is facing burn outs and losses. According to relevant data, Tiffany paid 0.58 cents per share twice in May and August. Although the merger and acquisition agreement allows Tiffany to pay dividends, LVMH believes that Tiffany should not pay dividends in the first quarter of 2020 in the event of a loss and a sharp drop in its share price. In this public health crisis, no other luxury company in the world has taken a similar approach.

LVMH stressed: Tiffany, which LVMH plans to acquire in November 2019, is a luxury retail brand with sustained high profits. Today, the original Tiffany no longer exists.

Tiffany defended its approach to the public health crisis: we have restored profitability and are expected to remain profitable in the second half of this year, and the fourth quarter may exceed the fourth quarter of 2019.

LVMHs paradox is another blatant attempt by LVMH to evade its contractual obligation to pay an agreed price for Tiffany, Tiffany chairman Roger Farah said

It is understood that the Delaware District Court of the United States will begin a four-day trial of the case from January 5, next year. A US judge said at the hearing that he hoped Tiffany and LVMH could have a fruitful discussion to avoid the need for litigation..

Still alive?

In November 2019, LVMH agreed to buy Tiffany for $135 per share in cash, with a total value of $16.3 billion, the largest acquisition ever made by Bernard Arnault, LVMHs chairman. Arnault had thought the deal would consolidate its position in high-end jewelry and the US market.

However, the outbreak of the new crown epidemic in 2020 will cause heavy losses to the whole luxury industry. LVMH said Tiffanys performance in the first half of the year and its prospects for 2020 have disappointed it, which is significantly inferior to LVMHs comparable brands in the same period.

Tiffanys price of $135 a share has been questioned by the sharp decline in earnings. Even before the outbreak, Tiffanys performance was very volatile, and the epidemic forced it to face unprecedented challenges, said Ike boruchow, an analyst at Wells Fargo.

However, affected by the uncertainty of the epidemic situation, it is still unclear when the luxury industry will fully recover. According to Bains Global Luxury Industry Research Report 2020 Spring Edition, affected by the new crown epidemic, the global personal luxury market sales in the first quarter of 2020 will drop by 25%, and the annual market size is expected to shrink by 20% to 35%. The specific situation depends on the speed of recovery.

With the prospect of the whole industry hazy, the abortion of LVMHs acquisition agreement with Tiffany seems certain. However, some analysts believe a deal is still possible - a lower price to sell or a deal with another buyer.

Pierre Brian, a Dow Jones analyst, said the trial was due to take place in January next year, leaving time for both sides to make concessions. In fact, Tiffanys share price had been below $100 in the months prior to LVMHs offer last year, so there may still be room for compromise. However, it remains to be seen whether Arnault is still interested in acquiring Tiffany at a lower price. In any case, the trade dispute between France and the United States has little impact on the outcome of the luxury goods acquisition dispute, Brian stressed. Chen believes that if the two sides eventually split up, Tiffany can continue to operate independently or choose to merge with other luxury groups, such as Richmond or Kaiyun. Source: Yang Bin, editor in charge of economic report in the 21st century_ NF4368

Pierre Brian, a Dow Jones analyst, said the trial was due to take place in January next year, leaving time for both sides to make concessions. In fact, Tiffanys share price had been below $100 in the months prior to LVMHs offer last year, so there may still be room for compromise. However, it remains to be seen whether Arnault is still interested in acquiring Tiffany at a lower price. In any case, the trade dispute between France and the United States has little impact on the outcome of the luxury goods acquisition dispute, Brian stressed.

Chen believes that if the two sides eventually split up, Tiffany can continue to operate independently or choose to merge with other luxury groups, such as Richmond or Kaiyun.