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LVMH is in talks to renegotiate its $ 16.6 billion acquisition of the American jewel Tiffany, moving closer to salvaging a deal reached shortly before the pandemic and avoiding a showdown in court, said four people with direct knowledge of the matter.
The world’s largest luxury goods group agreed to pay $ 135 a share in cash for Tiffany last November, but has been pushing to cut the price since the coronavirus crisis broke out.
An increasingly bitter war of words between LVMH, led by billionaire founder Bernard Arnault, and Tiffany, best known for her engagement rings encased in blue robin-egg-shaped boxes, escalated last month after the group French threatened to abandon the deal. That triggered competing lawsuits in the US commercial court in Delaware, creating the prospect of a hard-hitting court battle.
However, Tiffany recently noted that it was willing to consider a revised price as long as it was above $ 130 per share and the French company agreed to close the transaction without further changes, two people said.
LVMH was open to discussing such terms and the two sides were still in negotiations, two more people said. One person added that the price should drop below $ 133 for LVMH to agree to new terms. Every $ 1 per share of the original price equates to a savings of about $ 120 million.
Tiffany shares rose 1.5 percent to $ 124.71 in early New York trading on Tuesday after CNBC reported “indirect discussions” were taking place. The shares rose even higher, reaching $ 129.37, a rise of 5.3 percent, in afternoon trading after the Financial Times report on the price range under consideration.
LVMH and Tiffany declined to comment.
LVMH’s planned acquisition of Tiffany has become one of the highest-profile deals to found since the pandemic disrupted the global economy, including the luxury industry.
LVMH has played rough with the American jeweler, arguing that its prospects are much weaker now than when the deal was signed in November.
After failing to convince Tiffany to cut the deal, Arnault’s group said in September that it had to abandon the purchase after the French government asked it to delay the transaction following a trade dispute between Paris and Washington.
Tiffany subsequently turned to the US legal system to enforce the merger agreement and filed a lawsuit against LVMH seeking to force the French company to abide by the original terms of the agreement.
Arnault’s group responded in turn, filing a rival lawsuit alleging Tiffany’s “catastrophic” performance since the pandemic had left “dismal” prospects for the future.
The dispute between the companies comes as the resurgence of the pandemic in Europe and the United States keeps the luxury sector under pressure. Analysts have forecast that industry sales could fall as much as 30 percent this year, although third-quarter sales from LVMH and Hermès showed flashes of recovery, driven by Asian and American buyers.
Analysts said they weren’t sure whether the recent resurgence of infections in the United States and Europe will slow the rally.
