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Coronavirus: Louis Vuitton owner LVMH hits brakes on $16.2bn Tiffany takeover

Edmund Heaphy
Finance and news reporter
Tiffany & Co's store in Vienna's prestigious shopping zone. (Nicolas Economou/NurPhoto via Getty Images)

Luxury fashion conglomerate LVMH (MC.PA) on Thursday indicated that it was hitting the brakes on its $16.2bn (£13.1bn) takeover of famed US jeweller Tiffany and Co (TIF), noting that it was “not considering buying Tiffany shares on the market.”

The statement comes after fashion trade publication WWD reported that the board of LVMH — the parent of brands like Louis Vuitton, Christian Dior, and Givenchy — had raised concerns about the deal amid the coronavirus pandemic and the civil unrest in the US in the wake of George Floyd's death.

Citing “recent market rumors,” LVMH on Thursday seemed to confirm uncertainty about the deal, which was originally announced in November.

“LVMH confirms, on this occasion, that it is not considering buying Tiffany shares on the market,” it said.

But the conglomerate did not elaborate further, and representatives could not be reached to clarify whether the deal has been scrapped entirely or whether a renegotiation was on the cards.

If LVMH were to acquire Tiffany on the open market, it would shell out less than it had bargained for as part of the deal.

Stock in Tiffany closed at around $114 per share on Wednesday, 12% lower than the $130 price LVMH had pledged as part of the takeover agreement.

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The board of LVMH met in Paris on Tuesday night specifically to discuss the proposed merger, according to WWD.

The luxury goods giant also reportedly raised concerns about Tiffany’s ability to cover its debt covenants once the deal is closed.

Tiffany has had a difficult period of late: When LVMH first made its approach in October with an unsolicited $14.5bn takeover offer, the jeweller had been hit by lower tourist spending, a strong US dollar, and the trade war between the US and China.

Even though the all-cash offer was a 30% premium on Tiffany's share price, the company rejected the first approach and LVMH came back with the higher $16.2bn offer in November.

Tiffany accepted that proposal, but market conditions have deteriorated significantly since then.

By March, Tiffany had lost around half of its trading days in China since the onset of the pandemic, and it was subsequently forced to close most of its stores around the world.

Tiffany warned then that its financial results would take a significant hit due to the pandemic, but it declined to issue forecasts, citing the pending LVMH deal.

The jeweller was expected to announce earnings from its first quarter on Friday, but said in a filing that the results would now be issued on Tuesday, without citing a reason for the delay.

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Tiffany, founded more than 180 years ago, helped establish the diamond ring as an enduring symbol of commitment, and its iconic blue jewellery boxes are recognised across the world.

LVMH, which owns 75 prestigious brands, has around 4,500 stores worldwide. The acquisition of Tiffany would greatly expand its relatively small jewellery division, which currently includes TAG Heuer and Bulgari.

The deal was approved by the boards of both companies and “overwhelmingly” by the jeweller’s shareholders in February. It was expected to close in the middle of 2020.