Tiffany & Co. agreed to accept a lower price in its acquisition of LVMH Moët Hennessy Louis Vuitton SE, thus ending a dispute between the luxury goods companies that erupted after the coronavirus pandemic.
The companies have reached agreement on new terms of contract that call on LVMH to pay $ 131.50 a share for the iconic American jewelry maker, according to people familiar with the matter. It̵
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Tiffany’s board signed the revised terms at a meeting late Wednesday, one of the population said. Under the new framework, lawsuits over the deal would be resolved, paving the way for a new shareholder vote and a possible completion of the transaction before January.
Tiffany agreed to sell himself to the European consumer conglomerate at the end of last year in an agreement of approx. $ 16.2 billion LVMH, if approx. 75 brands include Louis Vuitton and Bulgari, so an opportunity to modernize jeweler who had struggled with weak demand. It would also strengthen LVMH in China, where the demand for luxury goods has risen steadily as incomes rise, and expand its presence in the United States
|TIF||TIFFANY & CO||129.95||+1.07||+ 0.83%|
|LVMUY||LVMH SHALL SEE HENNESSY LOUIS VUITTON||93.9||-4.20||-4.28%|
LVMH, with a market value of approx. 200 billion $, Is one of Europe’s most valuable companies and many times the size of Tiffany. It has a long history of creating deals, including a $ 13 billion move in 2017 to bring the entire French fashion house Dior under the ownership of LVMH.
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But the Tiffany acquisition represented the biggest effort yet by LVMH under Bernard Arnault, the French billionaire who has been its CEO and controlling shareholder for three decades. The benefits of the deal changed as the pandemic spread around the world in early 2020, forcing Tiffany and other retailers to close stores and harder to dente sales.
The pandemic has particularly hurt the demand for luxury brands as they tend to be more dependent than other consumer goods on both in-store sales and a steady stream of tourists. Consultants at Bain have expected a 20% to 35% drop in sales across the global luxury goods industry by 2020.
The LVMH said in September that they backed the deal using the new rationale for trade disputes between France and the Trump administration. It said it had received a letter from the French Foreign Ministry asking it to postpone the acquisition. Many saw the move as a bid to lower the price. Tiffany chairman Roger Farah said at the time that there was no basis under French law to require a company to breach a valid and binding agreement, and a French diplomatic official also said such a letter would not be binding. .
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Tiffany sued the LVMH in Delaware Chancery Court for enforcing the agreement or obtaining compensation. This prompted LVMH to sue, arguing that the American jewelers’ business had been so deeply damaged during the pandemic that their takeover deal was no longer valid. Some legal experts have said that LVMH faces long odds of ruling.
Whether it ultimately turns out to have been a good move for LVMH to challenge the deal – for a $ 400 million plus discount – remains to be seen, as the next time it tries to make a takeover, the target may hesitate, worried too. may risk being left at the altar.
Meanwhile, Tiffany shareholders have continued to receive a quarterly dividend of 58 percent per share. Stock and should get another. LVMH had criticized the company’s decision not to cut dividends despite losing money during the coronavirus crisis.
The connection is the most high-profile deal that is sour as a result of the pandemic, but far from the only one, especially among companies in the hard-hit retail sector. Private equity firm Sycamore Partners sued Victoria’s Secret parent company L Brands Inc. in April, saying the retailer had violated the terms of their merger agreement by closing stores, alienating workers and skipping rent payments. L Brands met each other and the two sides eventually agreed to scrap the deal.
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Mall rents Simon Property Group Inc. defendant to terminate an agreement of 3.6 billion. Dollars to buy high-end mall developer Taubman Centers Inc. Taubman objected and Simon later changed his complaint to claim that Taubman subsequently breached the merger agreement by renegotiating its credit facilities. The companies are due to go to trial in Oakland County Superior Court in Michigan next month.
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