The fashion industry’s biggest sale ever has fallen apart

When diamonds *aren’t* your best friend

By Tegan Mouton

The fashion industry’s biggest sale ever has fallen apart

LVMH Tiffany&Co.

It’s a battle of the luxury brands in the story of a multi-billion dollar deal gone wrong.

Last week LVMH (arguably the world’s biggest luxury brand conglomerate) called off its $16 billion acquisition of American jeweller Tiffany&Co., which had been dubbed “the biggest deal in luxury history”.

LVMH has cited delays, a directive from the French government and the jeweller’s management of the Covid-19 crisis as reasons for backing out of the deal, but Tiffany is refusing to let it go.

Where it all started

Around October 2019, Moët Hennessy Louis Vuitton (also known as LVMH) announced it wanted to buy Tiffany&Co. in an effort to grow its jewellery portfolio.

Soon after a sum of $16 billion USD (trust us you don’t want to know what that is in Rands) was accepted by the Tiffany&Co. board, and so the world’s largest fashion acquisition to date started rolling.

And then Covid-19 happened

Like most businesses, especially those in the luxury retail space, Tiffany took a massive knock early in the year when they were forced to temporarily close stores to limit the spread of the coronavirus. Understandably, people also weren’t rushing to buy diamonds as the economy flailed.

As a result, Tiffany announced in its June quarterly report that net sales in the Americas, its largest market, were down 45%.

This is one of the major reasons that LVMH started to develop cold feet, and they’ve since come out and criticised Tiffany’s handling of the Covid crisis.

The French government is kind of involved

LVMH also claims that the French government (LVMH is French), has asked the company to delay the deal beyond January 6 2021, because of the US imposing a new 25% luxury tax on French goods.

However, Tiffany says that the French government’s request for a delay has no real basis in French law.

Tiffany is now suing

Despite relations souring between the two groups, Tiffany still wants the deal to go through and has filed a lawsuit in the court of chancery of the state of Delaware, saying it: “refutes LVMH’s suggestions that it can avoid completing the acquisition by claiming Tiffany has undergone a material adverse effect or breached its obligations under the merger agreement, or that the transaction is in some way inconsistent with its patriotic duties as a French corporation.”

LVMH responded immediately saying that it will “defend itself vigorously” in court, and that they will, “challenge the handling of the crisis by Tiffany’s management and its Board of Directors.” Spicy!

While we sincerely hope that neither of the companies’ employees’ job security or income is on the line as a result, we find the back and forth between the two worthy of a reality series!

Buckle up, because this drama is just getting started.

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