Competition: LVMH can take over Tiffany, but no longer wants to
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Competition: LVMH can take over Tiffany, but no longer wants to

The Fondation Louis Vuitton in Paris, endowed by the company and designed by Frank Gehry. © Mokrtarama/Wikimedia

Luxury goods company LVMH has been given the go-ahead by the competition authorities of the European Commission to take over its sector counterpart Tiffany for $16.2 billion (€13.8 billion).

The takeover has only one catch: LVMH no longer wants to go ahead without a major revision of the price.

LVMH – the initials stand for Louis Vuitton Moet Hennessy – is based in France and has fashion, champagne and cognac in its name, and a wide range of clothing, cosmetics, fashion accessories, jewellery, perfumes, spirits, watches and wine brands in its portfolio.

Some examples: Château d’Yquem, Dom Pérignon, Glenmorangie, Christian Dior, Givenchy, Kenzo, Givenchy Parfums, Guerlain, Bulgari and TAG Heuer.

Tiffany, based in New York, is renowned for its jewellery, but also sells silverware, china, crystal, stationery, fragrances, water bottles, watches, personal accessories, and leather goods.

The Commission concluded that the proposed concentration would not raise competition concerns given the moderate market shares of the combined entity, the presence of a significant number of third-party suppliers, and the recent entry of several new competitors,” the Commission said in a statement.

The original price offered by LVMH was $135 (€115) a share back in November 2019, which would have made it the biggest deal ever in the luxury market, but the world has changed since then. The coronavirus pandemic has pulled the rug out from under the luxury market, which LVMH thinks has also reduced the value of Tiffany.

At the same time LVMH accused Tiffany of mismanagement, for example by paying out dividends to shareholders despite the difficulties of the pandemic.

Tiffany sued LVMH for wanting to pull out of the deal. LVMH counter-sued over mismanagement. In the end, the two companies came to the negotiating table to discuss a compromise.

The EU’s decision may seem like an irrelevance in the current circumstances, but the go-ahead from Brussels will be crucial if and when an agreement is reached. Ironically, the announcement of the competition authorities’ decision saw Tiffany’s share price go up by 33c to $123.13, while LVMH quote fell by $4.05 to $417.70.

The two companies are discussing a new offer price of $130 to $133. Should the talks break down, the lawsuits are still pending.

Alan Hope
The Brussels Times