LVMH/Tiffany: the mysterious affair of the French letter
One of the more accurate predictions at the start of the coronavirus pandemic was that it was likely to lead to a deluge of lawsuits. In that context, the “jilting of Tiffany” is fast emerging as a perfect period piece, said Liam Kelly in The Sunday Times. When the French luxury-goods giant LVMH declared last week that its $16.6bn (£12.9bn) offer to buy the celebrated US jeweller was effectively dead, Tiffany immediately sued to have the deal terms enforced – only to be whacked by a “counter claim” from LVMH alleging “dishonesty and mismanagement”. What an inglorious end to a tie-up which, when it was announced last November, was hailed not just as the “biggest luxury deal ever”, but also a “perfect match”.
LVMH boss Bernard Arnault (aka “the wolf in cashmere”) is renowned as the sector’s wiliest dealmaker, but this battle tops all previous showdowns for “drama, M&A machinations and political intrigue”, said DealBook in The New York Times. LVMH argues that the damage Covid-19 has inflicted on Tiffany is bad enough to change the terms of the bid. But it also cites a “highly unusual request” – contained in a now-infamous letter penned by the French foreign ministry – “to delay the closing of the deal” until wider trade tensions with the US had been resolved.
Cynics suggest that the letter gave LVMH an ideal excuse to walk away from an overly expensive deal, and that LVMH had actively procured this political “order” in order to give Arnault a way out, said Leila Abboud in the Financial Times. “You must be joking,” retorted the group’s CFO last week: the letter was “purely and fully unsolicited”. Whatever the case, LVMH and Tiffany are now embroiled in a “deepening legal battle”. For the moment, neither side looks likely to back down.