LVMH Fights Fast-Tracking Tiffany’s Suit Over Busted Deal

The legal battle between LVMH and Tiffany & Co. is escalating as the maker of Louis Vuitton bags tries to pull out of a $16 billion agreement to buy the jewelry brand.

The latest skirmish comes after a Delaware judge scheduled a Sept. 21 hearing to decide whether to expedite the case instead of waiting for a trial in 2021.

In a court filing on Wednesday, LVMH opposed Tiffany’s move to expedite, saying Tiffany is “seeking to manufacture an emergency where none exists.”

Tiffany Chairman Roger Farah countered in a statement that billionaire Bernard Arnault’s company is trying to “run out the clock” and should have no reason to oppose the request “if LVMH were confident in its legal position.”

The transaction has a Nov. 24 deadline.

Friction between LVMH and Tiffany emerged in March as the depth of the economic fallout from the pandemic became apparent. Tensions have only risen since then, culminating in LVMH’s move earlier this month to cancel the purchase, citing a letter from the French government. LVMH has lambasted the jewelry company’s response to Covid-19 and had pledged to file a countersuit.

Tiffany, which sued LVMH this month, counters in its court filings that LVMH is seeking to leverage police-brutality protests in the U.S. and a declining luxury market during the pandemic to negotiate a lower deal price.

Results released in late August showed that Tiffany returned to profitability in the second quarter after posting a loss in the previous period. Global net sales fell 29% in the quarter ended July 31, an improvement from the 45% drop in the first quarter, as China sales recovered and Tiffany’s e-commerce business helped offset a sharp decline in demand.

As the deal unravels, LVMH has criticized Tiffany’s performance, saying its prospects were “very disappointing.” The conglomerate, which owns the Moet & Chandon and Christian Dior brands, in particular criticized dividends paid at a time when the company was “loss making.”

Luxury Sellers

High-end goods from handbags to diamonds have been hit hard by the pandemic, which has halted tourism and tightened wallets worldwide. Luxury sellers could see as much as $100 billion in sales evaporate in 2020 and the industry may not fully recover for at least two more years, according to a report earlier this year from Bain & Co.

“Tiffany is desperate to create a distraction at this belated stage because the pandemic has seriously damaged its business and financial performance,” LVMH officials said in the filing. They contend Tiffany’s drop in business has created a so-called “material adverse effect” that provides grounds to nix the deal.

The sped-up handling of its request that LVMH be forced to consummate the buyout is “virtually impossible, unwarranted and unnecessary,” the French company’s lawyers added.

In a separate statement on Thursday, LVMH said Tiffany’s comments that fourth-quarter profits would be higher than last year’s are “fanciful, even worrying.” Achieving this result would mean Tiffany is slashing all current investments, notably in marketing and communications, which would be “detrimental to the future of the brand.”

The case is Tiffany & Co. v. LVMH Moet-Hennessy-Louis Vuitton SE, 2020-0768, Delaware Chancery Court (Dover).

©2020 Bloomberg L.P.

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