LVMH wants to renegotiate the $ 16.2 billion Tiffany deal

LVMH Chief Executive Bernard Arnault is exploring ways to reopen negotiations over the $ 16.2 billion acquisition of jewelry chain Tiffany & Co by French luxury goods giant, as social unrest in USA USA And the coronavirus pandemic weighs heavily on the retail sector, people familiar with the matter said Wednesday.

LVMH agreed to acquire Tiffany in November, but the deal has yet to be closed, pending regulatory approvals. Arnault said at the time that Tiffany “would prosper in the centuries to come” under LVMH.

Arnault has been in talks with his advisers this week to identify ways to pressure Tiffany to lower the price of the agreed deal from $ 135 a share, the sources said. It is considering whether it can argue that the New York-based company is breaching its obligations under the merger agreement, they said.

LVMH has yet to decide on a strategy to pursue a price cut and has not asked Tiffany to reopen the negotiations, according to sources. It is unclear whether it will, and what arguments it could follow.

Tiffany does not believe there is a legal basis to renegotiate the deal, the sources said. The company complies with the financial covenants of the merger agreement with LVMH, and expects to remain so after declaring a quarterly dividend two weeks ago, the sources said.

The sources asked not to be identified because the deliberations, first reported on Tuesday by the WWD publication, are confidential.

LVMH declined to comment. Tiffany did not immediately respond to requests for comment.

While Arnault is now worried about overpaying for Tiffany, he still believes in the strategic logic of the deal, according to sources.

Tiffany will give LVMH a greater share of the lucrative US market and expand its jewelry offerings, the fastest growing sector in the luxury goods industry.

If Tiffany rejected LVMH’s offer to reopen the deal, their dispute could end in Delaware court, the sources said. They said that a bitter end to the deal would make it difficult for LVMH to make another attempt to acquire Tiffany in the future.

Several acquirers have walked away or renegotiated deals in the wake of the pandemic. In the retail sector, private equity firm Sycamore Partners abandoned a $ 525 million deal to acquire a majority stake in L Brands’ Victoria’s Secret.

Consulting firm Bain expects global sales of high-end clothing, handbags, jewelry, and cosmetics to drop as much as 35 percent this year, as the health crisis has forced brands to close stores worldwide and stop sales. international travel.

The deterioration in market conditions was compounded for Tiffany and other New York-based retailers by protests and attacks on stores that followed George Floyd’s death by police on May 25.

Tiffany, founded in 1837 and known for her signature blue robin egg boxes, was already on the move, trying to rejuvenate her image and attract online shoppers. First quarter earnings must be reported on Friday.