Tiffany (TIF) Condemns LVMH's Request to Delay Merger Deal

Tiffany & Co. TIF has been trying all means to attain a timely decision regarding its merger agreement with LVMH Moet Hennessy Louis Vuitton SE or LVMH, a France-based luxury goods group. LVMH has requested the court to put a hold on its ongoing trial with Tiffany for about six or seven months. To this, Tiffany responded by stating that LVMH is trying to stall the proceeding of the court to avoid fulfilling its obligations of the merger deal.

LVMH’s request to delay the trial came after Tiffany’s earlier motion to expedite the lawsuit at the Delaware Chancery Court.  Earlier on, Tiffany had filed a suit against LVMH, when the latter intended to scrap the merger deal. Markedly, LVMH had taken a step back from this deal, citing a request from the France government to delay the same on the grounds of tariff threats. It also cited certain other hiccups, including a Material Adverse Effect upon the contract.

However, Tiffany is bent on not letting matters slip out of hands. The renowned jeweler continues to urge the court to enable a decision by Nov 24, which is essentially the termination date of the merger agreement.

Opposing LVMH’s Stalling Tactics

Per sources, LVMH claims that Tiffany is trying to rush to a decision to avoid proper scrutiny of the business. Reportedly, LVMH argued that Tiffany has not been able to manage its operations prudently amid the COVID-19 pandemic.

However, Tiffany continues to claim that LVMH is deliberately trying to shelf this $16.2-billion deal. The company alleges that LVMH has been seeking multiple excuses to avoid paying the agreed upon price.

Earlier, the company had condemned LVMH’s move to withdraw itself from the contract based on the French governments’ request. It also continues to disapprove LVMH’s claims regarding a Material Adverse Effect, as the company has not provided any clear basis for these assertions. In fact, Tiffany highlights that LVMH has breached its obligations of the contract by failing to obtain antitrust clearance in a timely manner.

Tiffany asserts that it has complied with all provisions of the agreement. This Zacks Rank #2 (Buy) company stated that its business fundamentals and financial performance have been stable, despite the pandemic. In fact, it returned to profits in second-quarter fiscal 2020. It expects earnings in the fourth quarter to rise year over year. Moreover, Tiffany justifies its dividend payment actions by highlighting a strong liquidity position. As of Aug 30, 2020, the company had cash reserves of nearly $1.1 billion and net debt of less than $350 million.

Wrapping up

Tiffany is clearly unhappy with LVMH’s moves to kill the merger. It has been defending its stand on the case and is looking forward to its completion on the previously-agreed terms. That said, it now lies in the hands of the court to determine the fate of this troubled acquisition deal.

Tiffany’s shares have lost 4.7% against the industry’s rise of 3.1% in the past three months.

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