Tiffany Agrees to New Deal Terms With LVMH
October 28 2020 - 10:28PM
Dow Jones News
By Cara Lombardo and Dana Cimilluca
Tiffany & Co. agreed to accept a lower price in its takeover
by LVMH Moët Hennessy Louis Vuitton SE, ending a dispute between
the luxury-goods companies that erupted after the coronavirus
pandemic upended the industry.
The companies have come to an agreement on new deal terms
calling for LVMH to pay $131.50 a share for the iconic U.S. jewelry
maker, according to people familiar with the matter. That's down
from an original price of $135 a share, equating to savings of
roughly $430 million for LVMH. It would allow the two sides to
avoid what would have been a costly and time-consuming trial set to
start in January.
Tiffany's board signed off on the revised terms at a meeting
late Wednesday, one of the people said. Under the new framework,
litigation over the deal would be resolved, paving the way for a
new shareholder vote and a closing of the transaction possibly by
January.
Tiffany agreed to sell itself to the European consumer
conglomerate late last year in a roughly $16.2 billion deal. LVMH,
whose roughly 75 brands include Louis Vuitton and Bulgari, saw an
opportunity to revamp the jeweler, which had struggled with weak
demand. It would also strengthen LVMH in China, where demand for
luxury goods has been steadily increasing as incomes rise, and
expand its presence in the U.S.
LVMH, with a market value of roughly $200 billion, is one of
Europe's most valuable companies and many times the size of
Tiffany. It has a long history of deal making, including a $13
billion move in 2017 to bring all of French fashion house Dior
under the ownership of LVMH.
But the Tiffany acquisition represented the biggest bet yet by
LVMH under Bernard Arnault, the French billionaire who has been its
chief executive and controlling shareholder for three decades. The
deal's merits changed when the pandemic spread around the world in
early 2020, forcing Tiffany and other retailers to close stores and
severely denting sales.
The pandemic has especially hurt demand for luxury brands, given
that they tend to be more reliant than other consumer goods on both
in-store sales and steady streams of tourists. Consultants at Bain
have forecast a sales decline of 20% to 35% across the global
luxury-goods industry in 2020.
LVMH said in September it was backing out of the deal, using the
novel justification of trade disputes between France and the Trump
administration. It said it had received a letter from the French
foreign ministry asking it to delay the acquisition. Many saw the
move as a bid to lower the price. Tiffany Chairman Roger Farah said
at the time there was no basis under French law to order a company
to breach a valid and binding agreement and a French diplomatic
official also said such a letter wouldn't be binding.
Tiffany sued LVMH in Delaware Chancery Court to enforce the
agreement or obtain damages. That prompted LVMH to countersue,
arguing the U.S. jeweler's business had been so deeply damaged
during the pandemic that their takeover agreement was no longer
valid. Some legal experts have said LVMH faced long odds of
prevailing.
Whether in the end it turns out to have been a good move for
LVMH to challenge the deal -- for a $400 million-plus discount --
remains to be seen, given that the next time it tries to make an
acquisition the target could hesitate, worried it too could risk
being left at the altar.
Meanwhile, Tiffany shareholders have continued to receive a
58-cent-per-share quarterly dividend and are to get another one.
LVMH had criticized the company's decision not to cut its dividend
despite losing money during the coronavirus crisis.
The tie-up is the highest-profile deal to sour as a result of
the pandemic, though far from the only one, especially among
companies in the hard-hit retail sector. Private-equity firm
Sycamore Partners sued Victoria's Secret parent L Brands Inc. in
April, saying that the retailer had violated the terms of their
merger agreement by closing stores, furloughing workers and
skipping rent payments. L Brands countersued, and the two sides
eventually agreed to scrap the deal.
Mall landlord Simon Property Group Inc. sued to terminate a $3.6
billion deal to buy high-end mall developer Taubman Centers Inc.
Taubman countersued and Simon later amended its complaint to argue
that Taubman since breached the merger agreement by renegotiating
its credit facilities. The companies are set to go to trial in
Oakland County Superior Court in Michigan next month.
Write to Cara Lombardo at cara.lombardo@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
October 28, 2020 22:13 ET (02:13 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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