Tiffany sued LVMH after it backed out of a $16 billion deal because of the French Government’s request and the financial impact of COVID. According to the agreement, LVMH, the French luxury brand, would acquire Tiffany, the US jewelers.
The reason behind backing out of the deal
The French government put forward it’s requesting by writing a letter to LVMH’s board. The reason cited by the government was the increased tariffs that the US is imposing on French products, said Bernard Arnault. He also said that the government asked to delay the acquisition until Jan 6, 2021.
This whole government intervention made the deadline for the acquisition of Nov 24 impossible to meet. In a letter to Barnard, France’s foreign minister wrote, “I am sure that you will understand the need to take part in our country’s efforts to defend its national interests.”
Now, the thing is we don’t actually know about the real reason behind the whole mess. According to LVMH finance chief Jean Jacques Guiony, “The deal cannot happen. We are prohibited from closing the deal”. But, according to some rumors, LVMH might have asked the French government to help them back out of the deal.
The political aspect of the deal
With the French-US tariff problems going on, the government’s stopping the deal seems to be a political move. Therefore, the government’s letter might have meant to alert LVMH of the political problems going on.
Luca Solca, a luxury goods analyst, also said, “The French government is certainly very active in defending the French national interest. But this has meant in most cases preventing acquisition of French companies,”
The decreasing sales of Tiffany due to the pandemic might also be why LVMH backed out of the deal. What are your thoughts on the whole situation? Do let us know in the comments below. Again, if you found our content informative, do like, and share it with your friends.
