The world leader in luxury and owner of Louis Vuitton LVMH is dropping its $16.2 billion deal of Tiffany acquisition. The American luxury jewelry and specialty retailer’s agreement would have been the biggest yet in the luxury industry.
LVMH released a statement on Wednesday that the merger agreement they had with Tiffany in November 2019 provides a closing deadline no later than November 24 this year. But Tiffany requested to extend the date until December 31. Moreover, the French minister of foreign affairs had directed the company to postpone the deal unti January 6 of next year due to a threat on French goods by U.S. taxes
LVMH released in a statement that its supposed acquisition of Tiffany will not push through. The company said that it needs additional time to determine any impact from potential U.S. tax on French goods. So, therefore they cannot secure the deal by December this year.
According to Tiffany, the company’s shares plummeted by 10% in early trading Wednesday. The jewelry retailers’ claims with a $14.8 billion market value have tumbled nearly 9% this 2020. When asked for a comment, Tiffany’s representative refused to give a statement to CNBC’s request.
The Wall Street Journal reported that Tiffany had filed a lawsuit in Delaware to enforce the agreement, stating that the French government’s request has no basis in law.
The COVID-19 pandemic has hit the U.S. jewelry chain hard, sending Tiffany’s same-store sales for the past months down to 44% and throwing the $16.2 billion with LVMH into doubt. Investors are now worried that the French company overpaid. According to people familiar with the matter, the CEO of LVMH, Bernard Arnault, was looking to lower the price of buying the jewelry retail chain.
Amid the issue, the two companies have agreed to push back an initial deadline for November 24, 2020, as negotiations started to sour. According to analysts, they believed the transaction will still go on, but at a lower price.
With the coronavirus pandemic putting international tourism into a halt, Tiffany and other luxury retailer businesses have suffered much, as many relied on big spenders from China. Initially, LVMH was looking into growing its jewelry business by purchasing Tiffany, but the pandemic placed this decision into many challenges.
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