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Tiffany sticks to its guns in push to uphold LVMH deal
[NEW YORK] Tiffany stood by a legal push to uphold its US$16 billion sale to LVMH, saying the French luxury giant's justification for trying to back out of the deal is baseless and misleading.
"LVMH's specious arguments are yet another blatant attempt to evade its contractual obligation to pay the agreed-upon price for Tiffany," the jeweller's chairman, Roger Farah, said in a statement Tuesday.
The riposte came after LVMH countersued Tiffany, weeks after moving to end its purchase of the iconic New York-based jeweller. The owner of Louis Vuitton said the decision was driven by the French government's request to delay the deal's closing and Tiffany's mismanagement during the pandemic.
LVMH contends Tiffany's business was devastated by the coronavirus outbreak and that provides proper grounds to nix the buyout, according to a filing Monday in Delaware Chancery Court.
Tiffany shot back that the French company's claim of a material adverse effect that would justify ending the deal is nonsense. It said fourth-quarter earnings are on track to be higher than a year earlier and it rejected LVMH's suggestion that it's at risk of breaching debt covenants.
The jeweller sued LVMH earlier this month to force it to go forward with the deal, saying in a court filing that the French company is trying to use the pandemic-induced downturn in the luxury sector to negotiate a lower acquisition price.
In its counterclaims, LVMH also cited a letter from French Foreign Minister Jean-Yves Le Drian seeking a delay in closing the transaction as part of a trade war with the US. The letter amounts to a "legal restraint" under the terms of the buyout that prohibits the deal from closing by a Nov 24 deadline, LVMH's lawyers noted in the 96-page filing.
Judge Joseph Slights III has set a Jan 5 non-jury trial to decide whether LVMH must consummate the sale.
Mr Le Drian on Sunday called "excessive" the controversy surrounding his missive. "It's my duty to protect French interests," he told Le Parisien newspaper in an interview. "Regarding the trans-Atlantic situation, the trade disagreements we have are known. It was therefore my role to inform LVMH of my political appraisal of the moment." Bloomberg News on Sept 10 reported that Mr Le Drian wrote the letter after LVMH chief executive officer Bernard Arnault leaned on the government for support in wiggling out of the takeover.
The deal was announced last November, but friction between LVMH and Tiffany emerged in March as the depth of the economic fallout from the pandemic became apparent. Tiffany contends LVMH is angling to force a price cut in the deal.
LVMH said Tiffany's losses tied to the Covid-19 pandemic are more significant than those suffered by the luxury retailer during the 2008 financial crisis. "The business LVMH proposed to acquire in November of 2019" no longer exists, the French company said in its countersuit.