LVMH Countersues Tiffany Over Merger
September 28 2020 - 7:03PM
Dow Jones News
By Matthew Dalton
LVMH Moet Hennessy Louis Vuitton SE sued Tiffany & Co over
their soured merger deal, saying the U.S. jeweler's business has
been so deeply damaged during the pandemic that their takeover
agreement is invalidated.
The lawsuit, filed Monday in Delaware Chancery Court, counters a
lawsuit that Tiffany filed this month against LVMH after the French
conglomerate -- owner of Louis Vuitton, Dior and dozens of other
luxury brands -- said it was backing out of its $16 billion
acquisition of the jeweler.
LVMH's lawsuit says Tiffany has been mismanaged during the
pandemic and is particularly vulnerable to the disruption the
industry is likely to suffer in the years to come. Tiffany has
suffered a material adverse change to its business, LVMH says,
triggering a standard provision in merger agreements that allows
the buyer to walk away.
Tiffancy declined to comment.
The complaint says Tiffany's dependence on the U.S. market and
foot traffic in malls means the jeweler's prospects are
particularly grim compared to the broader luxury industry, which
has been thrown into turmoil by the pandemic.
"The pandemic's disruption to the luxury industry and to Tiffany
in particular will persist well into 2021 at a bare minimum,"
LVMH's complaint says. "Tiffany is particularly ill-suited for the
challenges ahead."
To escape from a merger contract, acquiring companies face the
burden of showing that a target company's performance has been
unusually bad relative to others in its industry, legal experts
say.
The complaint repeats the claim that LVMH is legally barred from
completing the deal because of a letter sent by the French foreign
minister, Jean-Yves Le Drian, that said LVMH "should" delay the
acquisition of Tiffany to early January, more than a month after
the deadline for closing the deal.
"'Should' is a translation of 'il conviendrait,' used in the
original letter in French, which is understood to have a (polite)
mandatory meaning under French law," LVMH said.
Before Mr. Le Drian sent his letter, LVMH representatives asked
the French finance minister for help in backing out of its
agreement to take over Tiffany, and was turned down, according to
senior French officials. Mr. Le Drian last week said he was
responding to a request from LVMH for political advice when he
wrote the letter to the luxury conglomerate.
Write to Matthew Dalton at Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
September 28, 2020 18:48 ET (22:48 GMT)
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