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The Tiffany & Co. sign hangs in a shop window in London, Monday, Nov. 25, 2019. (AP Photo/Kirsty Wigglesworth)

Luxury goods giant LVMH cancels US$14.5B deal for Tiffany

The Tiffany & Co. sign hangs in a shop window in London, Monday, Nov. 25, 2019. (AP Photo/Kirsty Wigglesworth)

Luxury goods giant LVMH is ending its takeover deal of jewellery retailer Tiffany & Co., saying the French government had requested a delay to assess the threat of proposed US tariffs and amid wider industry troubles caused by the pandemic.

LVMH is ending its takeover bid of jewellery retailer Tiffany and Co.

The Paris-based conglomerate said that both the French government and Tiffany had requested that the closing of the deal be postponed by a few months. The French government, it said, wanted to assess the impact of the possible US tariffs on French goods.

As a result, LVMH said, the US$14.5 billion deal that was scheduled to close Nov. 24 will be cancelled.

Tiffany replied that it’s suing to enforce the merger agreement, which was signed in November 2019. The New York company said LVMH’s argument has no basis in French law. Tiffany also said that LVMH hasn’t even attempted to seek the required antitrust approval from three jurisdictions.

LVMH, which owns more than 70 luxury brands, is led by French billionaire Bernard Arnault.

Shares in Tiffany slid nearly 10 per cent in early morning trading in New York. Those in LVMH, which owns 75 brands including Christian Dior, Fendi, Givenchy and Tag Heuer, were stable.

The deal’s value came under strain during the coronavirus pandemic, which caused retail sales to plunge around the world. Tiffany’s share price has been trading around US$125 a share for weeks – below the US$135 per share price that LVMH had agreed to pay last fall, before the pandemic.

Back then, industry experts had said the deal made sense. Tiffany, known for its delicate jewellery, distinctive blue boxes and an Audrey Hepburn movie, had been trying to transform its brand to appeal to younger and more digital shoppers, and could have used an owner with deep pockets to help expand.

Tiffny’s is known for its iconic blue box and delicate jewellery.

LVMH, led by billionaire Bernard Arnault, had thought the deal would strengthen its position in high-end jewelry and in the US market. LVMH was also making a bet on China’s economy, where Tiffany had been expanding its presence.

The pandemic threw all those assumptions and plans in doubt, and the threat of new tariffs between the U.S. and Europe was cited as a further complicating issue.

Before COVID, the global market for personal luxury goods was solid, reaching a record high of US$307.1 billion (260 billion euros) in 2018 — six per cent increase from the year before, according to consulting firm Bain & Co. That sector slipped by 2.1 per cent to US$331.9 (281 billion euros) last year, according to Bain estimates. But given COVID’s financial fallout and the shutdown of tourism worldwide, those sales could drop by 20 per cent to 35 per cent in 2020, Bain estimates. Bain expects that personal luxury sales won’t recover to pre-COVID levels until 2022 and 2023.

Last year, France sought to impose a tax on global tech giants including Google, Amazon and Facebook. The French tech tax is aimed at “establishing tax justice.” France wants digital companies to pay their fair share of taxes in countries where they make money instead of using tax havens, and is pushing for an international agreement on the issue.

In response to the tech tax, the US threatened to slap 100 per cent tariffs on US$2.4 billion of French products.

The two sides are at a tense truce as France has said it would delay collection of the digital tax until December, parking the issue until after the next US presidential election where Trump hopes to secure another four-year term.