France’s LVMH halting $14.5B takeover of Tiffany

Luxury goods giant cites pandemic, possible US tariffs

NEW YORK — Luxury goods giant LVMH is ending its takeover deal of jewelry retailer Tiffany & Co., saying the French government had requested a delay to assess the threat of proposed U.S. tariffs and amid wider industry troubles caused by the pandemic.

The Paris-based conglomerate said that both the French government and Tiffany had requested that the closing of the deal be postponed by a few months. The French government, it said, wanted to assess the impact of the possible U.S. tariffs on French goods.

As a result, LVMH said, the $14.5 billion deal — which would have been biggest ever in the luxury market and was scheduled to close Nov. 24 — will be canceled.

Tiffany replied that it's suing to enforce the merger agreement, which was signed in November 2019. The New York company said LVMH's argument has no basis in French law. Tiffany also said that

LVMH hasn't even attempted to seek the required antitrust approval from three jurisdictions.

“We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction on the agreed terms,” said Roger Farah, chairman of Tiffany, in a statement.

LVMH owns 75 brands including Christian Dior, Fendi, Givenchy and Tag Heuer.

The deal's value came under strain during the coronavirus pandemic, which caused retail sales to plunge around the world. Tiffany's share price has been trading around $125 a share for weeks — below the $135 per share price that LVMH had agreed to pay last fall, before the pandemic.

Back then, industry experts had said the deal made sense. Tiffany, known for its delicate jewelry, distinctive blue boxes and an Audrey Hepburn movie, had been trying to transform its brand to appeal to younger and more digital shoppers, and could have used an owner with deep pockets to help expand.

LVMH, led by billionaire Bernard

Arnault, had thought the deal would strengthen its position in high-end jewelry and in the U.S. market. LVMH was also making a bet on China's economy, where Tiffany had been expanding its presence.

The pandemic threw all those assumptions and plans in doubt, and the threat of new tariffs between the U.S. and Europe was cited as a further complicating issue.

Before COVID, the global market for personal luxury goods was solid, reaching a record high of $307.1 billion in 2018 — a 6% increase from the year before, according to consulting firm Bain & Co. That sector slipped by 2.1% to $331.9 last year, according to Bain estimates.

But given COVID's financial fallout and the shutdown of tourism worldwide, those sales could drop by 20% to 35% in 2020, Bain estimates. Bain expects that personal luxury sales won't recover to pre-COVID levels until 2022 and 2023.

Tiffany's global sales declined 29% during the fiscal second quarter ended July 31, following a 45% drop in the fiscal first quarter.