Breakingviews - Tiffany bust-up risks double defeat for LVMH

Tiffany & Co. jewelry is displayed in a store in Paris, France, November 25, 2019.

ZURICH (Reuters Breakingviews) - Bernard Arnault is having regrets about his $16 billion jewellery purchase. But the French tycoon’s attempt to haggle down the pre-pandemic price his LVMH negotiated for Tiffany could backfire. The luxury giant on Wednesday delayed completing its takeover of the U.S. group, blaming iffy French concerns about a trade war with America. Even if Arnault succeeds in getting a lower price, his tactics risk alienating future targets.

The $240 billion owner of Bulgari and Celine’s last-minute attempt to wriggle out of its $135-a-share cash offer for Tiffany is nothing if not creative. LVMH says it cannot complete the planned acquisition by a Nov. 24 deadline because the French foreign ministry requested it delay until Jan. 6, due to threat of U.S. tariffs against French products. Tiffany, which was already annoyed at LVMH’s slow pace in seeking approval from European Union competition authorities, is suing to force LVMH to go ahead on the original terms.

Arnault’s reluctance is understandable. The price tag was already expensive before the pandemic, and the deal terms allow LVMH to walk away if the regulatory process is not completed by Nov. 24. However, the French government’s request, which came in a letter dated Aug. 31, does not appear to be a strict government injunction. And it was only shown to Tiffany in an English translation on Tuesday, suggesting LVMH kept its target in the dark about a crucial development.

The French group may still have the upper hand. The outcome of a court case is never certain. Shareholders may pressure the U.S. company to accept a lower price, rather than risk the deal falling through and returning its shares to their pre-bid level of below $100. Tiffany shares were down 10% at around $110 on Wednesday morning in New York, suggesting that investors think a deal is still possible.

Yet even if Arnault secures a discount, his reputation as a reliable buyer will take a knock. LVMH’s expansion depends in part on his ability to persuade fashion houses and luxury entrepreneurs that the French company will be a responsible custodian of their brands. The tycoon has already ruffled feathers with his failed hostile attempt to take control of rival Hermes International. The Tiffany saga will only make smaller rivals like Moncler or family-controlled Prada more wary of Arnault’s embrace.


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