LVMH and Tiffany Put a Ring on it, but for a Slightly Lower Price

By Thomas Price Thursday, October 29, 2020

With the COVID-19 pandemic throwing off any long term plans set in motion before the year began, many major business deals have had a less than seamless conclusion as the year has waned on. That is what happened between LVMH Moët Hennessy Louis Vuitton (or simply LVMH) and Tiffany and Co. After making agreements back in November 2019 for LVMH to take over Tiffany for billions of dollars, September 2020 saw both companies suing each other over the botched attempt by LVMH to pull out of that deal as several different snags came to the surface. However, it appears that things have finally smoothed out, albeit with modified terms. So, what are the new terms of the deal, and how can this be a benefit to both companies?

The Initial Deal Falling Through

In November of 2019, LVMH and Tiffany made a deal for the former to purchase the latter in a massive $16.2 billion acquisition deal, which was set to close at the end of November in 2020. However, by September of this year, LVMH had publicly announced that it was going to simply abandon the deal, leaving everything on the table. There were three major factors in play over why this may have happened. The first comes simply from Tiffany’s request to extend the deal past the initially agreed-upon deadline, leading to some tension and difficulty. Of course, that was further exacerbated by the COVID-19 pandemic, which throttled sales for luxury goods and items such as jewelry. In fact, Tiffany’s sales in 2020 have completely stagnated, with the company only making $0.556 billion in the first quarter - a whopping 44% decline from the same quarter last year. While they did recover slightly to generate $0.747 billion in the second quarter, that is still a staggering 28.79% dropoff year over year. This has led to LVMH publicly trying to lower their initial price. Compounding all of this even further was the possibility of the US imposing tariffs on French luxury goods in response to those currently imposed on tech companies such as Amazon and Facebook. However, LVMH’s fear over this may have been nothing more than a ploy to reach a cheaper deal, according to some analysts.

All of these factors eventually resulted in a pair of lawsuits, as each side sued the other, each making some valid points. Tiffany sued first, stating that there were no legal grounds for LVMH to back out of the deal, and the merger should still happen. This led to LVMH suing in response by pointing to the pandemic as having hurt Tiffany’s value and could create a long term effect. Despite all of this, however, a deal has finally been reached.

LVMH and Tiffany & Co.’s New Deal

After all of this turmoil, the companies released a joint statement announcing a new deal with slightly renegotiated terms. Instead of a $16.2 billion price tag, LVMH will pay about $400 million less, translating to a cost of $15.8 billion instead. That will lower the price per share from $135 down to $131.50. With both sides reaching what appears to be an amicable conclusion, the deal itself will be incredibly beneficial. Tiffany will rake in considerable money from a company that is not likely to make drastic changes to their operations. At the same time, LVMH can finally bolster up their jewelry and watch selection, which, up to this point, was viewed as their weakest point as a luxury goods company. In fact, even as LVMH bounced back strongly in the third quarter with sales in every market reaching close to where it was in the same quarter in 2019, jewelry and watches for them still lagged with numbers around 14% and 16%, respectively. The acquisition of Tiffany will certainly change that for LVMH without question.

While there were significant hurdles to finally complete the deal as the pandemic, major drops in sales, possible trade tariffs, and two lawsuits left much still in doubt, LMVH’s acquisition of Tiffany should be a mutually advantageous agreement. The deal will almost certainly lead both companies to a stronger foundation for each section to stand on in the future, especially as the economy recovers.

About the Author

Headshot for author Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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