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LVMH MOËT HENNESSY LOUIS VUITTON SE

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LVMH Says Tiffany's Handling of Pandemic Invalidates Deal

09/10/2020 | 09:49am EDT

By Matthew Dalton

PARIS -- LVMH Moët Hennessy Louis Vuitton SE has shifted its rationale for why it decided to pull out of its biggest acquisition ever.

The French luxury conglomerate lashed out at Tiffany & Co. Thursday, saying its $16.2 billion deal to take over the U.S. jeweler was no longer valid because the company had been mismanaged during the coronavirus pandemic.

The move ratchets up a confrontation between the two companies that has drawn in the French government and the White House. On Wednesday LVMH said it was abandoning the deal because of trade tensions between France and the Trump administration. The company, which owns Louis Vuitton, Dior and dozens of other luxury brands, said it received a letter from the French foreign minister directing it to delay the purchase as part of France's response to Washington's threats to impose tariffs on European goods.

On Thursday, LVMH said Tiffany's first-half results and its outlook for 2020 "are very disappointing, and significantly inferior to those of comparable brands of the LVMH Group during this period."

"LVMH will be therefore led to challenge the handling of the crisis by Tiffany's management and its Board of Directors," LVMH added.

A Tiffany spokesman didn't immediately respond to a request for comment.

On Wednesday LVMH said it considered the letter from the French government a legally binding order. But a French diplomatic official disputed that interpretation, saying the letter was only a request and not binding on the company.

Tiffany immediately sued LVMH in Delaware Chancery Court, saying the French company was using the letter as a pretext to get out of a deal that had been signed before the coronavirus pandemic threw the luxury-goods industry into turmoil.

On Thursday, LVMH cited as evidence of mismanagement Tiffany's decision to pay its full dividend throughout the pandemic. For the quarter ending July 31, Tiffany's sales fell 29% compared with the same period a year ago. That is better than the 45% year-over-year drop the company reported in the three months ended April 30. The company posted net profit of $32 million in the July quarter, after losing $65 million in the previous quarter during the peak of the pandemic, when its boutiques were closed around much of the world.

LVMH also said Thursday it plans to seek approval for the merger from the European Commission, the European Union regulator, despite insisting that the merger cannot happen. That move aims to refute one of the arguments Tiffany made in its lawsuit: that LVMH was dragging its feet in obtaining regulatory approvals as it searched for ways to get out of the deal.

"The filing in Brussels will take place, as expected, in the following days and this is simply the result of the planning fixed by the European Commission, about which Tiffany is completely aware," LVMH said. "It is legitimate to expect this authorization will be obtained in October."

Write to Matthew Dalton at Matthew.Dalton@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
CHRISTIAN DIOR SE -0.50% 692 Real-time Quote.53.43%
LVMH MOËT HENNESSY LOUIS VUITTON SE -0.45% 684.4 Real-time Quote.34.53%
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Financials
Sales 2021 59 663 M 70 927 M 70 927 M
Net income 2021 8 811 M 10 474 M 10 474 M
Net Debt 2021 19 321 M 22 968 M 22 968 M
P/E ratio 2021 39,8x
Yield 2021 1,09%
Capitalization 346 B 413 B 412 B
EV / Sales 2021 6,13x
EV / Sales 2022 5,48x
Nbr of Employees 148 343
Free-Float 52,2%
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Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 655,19 €
Last Close Price 687,30 €
Spread / Highest target 16,4%
Spread / Average Target -4,67%
Spread / Lowest Target -53,0%
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Managers and Directors
NameTitle
Bernard Arnault Chairman & Chief Executive Officer
Antonio Federico Belloni Group Managing Director & Director
Jean-Jacques Guiony Chief Financial Officer
Charles de Croisset Independent Director
Diego della Valle Independent Director
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