Louis Vuitton Sues Renowned Jeweler Tiffany & Co Over Merger Complications

Luxury goods company LVMH (commonly referred to as Louis Vuitton) is countersuing Tiffany & Co, claiming that the renowned jeweler’s mismanagement of their finances during the COVID-19 pandemic allows them to abandon the planned $16 billion acquisition.

The trouble seems to have started as a result of COVID-related economic difficulties.

This action comes after plans made between the two companies in November 2019 for LVMH to acquire luxury jewelry, Tiffany & Co. in an agreed-upon merger. When LVMH attempted to back out of the agreement claiming that Tiffany & Co was no longer the highly-profitable and well-managed brand they had agreed to acquire, the jeweler filed a lawsuit against the luxury retailer to enforce the merger. Tiffany & Co believe this countersuit is simply an attempt to get out of paying the agreed-upon price for the acquisition of their company.

LVMH claims that the virus has so negatively affected and changed Tiffany & Co that the takeover agreement should no longer be considered valid.

Due to the pandemic, the French government is said to have requested the transaction be delayed another year. It is partially because of this delay that LVMH claims they are prevented from closing the deal, and also due to the material adverse changes the jeweler has recently suffered.

LVMH claims that Tiffany & Co suffered a material adverse effect.

Many companies have suffered under the pandemic, and Tiffany & Co is no exception. If LVMH’s claims that the jeweler suffered material adverse effects on their business as a result of the pandemic are true, they may be released from the contract. A standard provision in most merger agreements allows the acquiring party to abandon the deal if one of the companies suffers unexpected material adverse effects. LVMH argues that under this standard provision, Tiffany & Co must assume the risk of damages caused by the virus outbreak.

It has been suggested that Tiffany & Co is faring worse than other luxury brands.

One type of evidence necessary to escape a merger agreement is that the company to be acquired is performing worse than others in the industry. In addition to the other arguments LVMH has levied against the jeweler, they suggest that Tiffany & Co is faring worse than other similar luxury brands; this is thought to be related to their locations.

Some Tiffany & Co locations have become problematic; they are located in shopping malls.

With the pandemic, many malls closed, and those that are reopening are not yet experiencing a strong comeback in shoppers. People hesitant to return to what were once bustling, crowded retail locations, and social distancing requirements have distinctly changed the mall-going experience. Failure to account for this kind of risk only adds fuel to LVMH’s argument that Tiffany & Co has been mismanaged.

A U.S. judge has scheduled the trial to begin on January 5th, 2021, but has expressed hopes that parties may come to an agreeable settlement before then.