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Deal or no deal? LVMH hesitant about US$16.2 billion buyout of Tiffany & Co

Amid the COVID-19 pandemic and current social unrest in the US, LVMH executives are reportedly reconsidering the buyout.

Deal or no deal? LVMH hesitant about US$16.2 billion buyout of Tiffany & Co

FILE PHOTO: A man passes by the closed Tiffany & Co store on Wall St. in the financial district of New York City, U.S., March 17, 2020. REUTERS/Lucas Jackson/File Photo

Louis Vuitton owner LVMH’s US$16.2 billion (S$22.6 billion) deal to buy luxury jeweller Tiffany & Co is looking less likely to go through, believes fashion trade publication WWD. According to publication sources, LVMH members called a meeting in Paris on Tuesday night (June 2) to discuss the deal amid a deteriorating situation in the US, Tiffany’s largest market.

LVMH board members expressed concern about the economic impact of the COVID-19 pandemic, as well as growing social unrest in the US following the death of George Floyd by Minneapolis police. Retail in certain parts of the US were beginning to spring back to life post-lockdown, but the recent riots, looting and property damage are upending attempts to get the economy back on its feet.

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In addition, LVMH board members reportedly voiced concerns about Tiffany’s ability to cover all of its debt covenants at the end of the transaction, which was expected to be concluded midyear, according to WWD.

No decision was made at the Tuesday meeting, WWD said, but attendees expressed that the deal should be reconsidered.

The luxury conglomerate originally reached a deal to buy Tiffany & Co in November 2019. At US$16.2 billion, or US$135 per share, the buyout would be the luxury industry’s biggest deal ever.

"We are delighted to have the opportunity to welcome Tiffany, a company with an unparalleled heritage and unique position in the global jewellery world, to the LVMH family," Bernard Arnault, CEO of LVMH said at the time.

The acquisition of Tiffany would strengthen LVMH’s position in jewellery and increase its presence in the US, the company said in a statement.

In March, LVMH denied reports that it was considering buying shares in Tiffany on the open market, a move that would allow the conglomerate to pursue the buyout at a lower price than the agreed.

READ> Louis Vuitton owner says it will not buy Tiffany shares on open market

After the news that the US$16.2 billion deal is now less likely to go through, Tiffany & Co’s shares took a plunge, falling 9 per cent at the end of Tuesday.

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Source: CNA/st(ds)