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Tiffany wins speedy trial over LVMH’s bid to ditch US$16.6 billion takeover deal

The US jeweller has won the first round of a court battle that could decide the fate of the US$16.6 billion acquisition.

Tiffany wins speedy trial over LVMH’s bid to ditch US$16.6 billion takeover deal

(Photo: AP Photo/Michel Euler)

LVMH’s attempt to walk away from its US$16.6 billion (S$22.6 billion) takeover of Tiffany will go to trial in January, after the US jeweller warned that a longer timeline could force it to accept a lower price or lose the deal.

In a win for the New York-listed company as it tries to hold its Paris-based suitor to the terms of the largest deal in the luxury sector, a US court ruled on Monday (Sep 21) to expedite the case that Tiffany has brought against LVMH.

Joseph Slights, the judge presiding over the case in Delaware, rejected LVMH’s arguments that the case was too complex to expedite, particularly during a pandemic. Setting a four-day trial at the start of January, the judge said he was “not persuaded” by arguments that the French company had made to “slow track” the legal fight. 

In court on Monday, lawyers for Tiffany argued that a protracted process could force it to rip up the existing terms of the deal, to the benefit of LVMH. 

Richard Pepperman, partner at Sullivan & Cromwell, said the jeweller was operating under several restrictions imposed by the terms of the deal, including curbs on capital expenditure. “They will have a massively disruptive effect on Tiffany’s business if LVMH is successful in delaying closing,” he argued. 

The timing of the trial has become central to the fate of the disputed deal, with Monday’s ruling being the first that could shift the balance of power between the sides. 

The deal is the highest-profile example of how acquisitions agreed before the pandemic have soured in the face of a dimmed business outlook. 

The combination of Tiffany with LVMH would bring the jeweller – founded in 1837 and known for its store on Manhattan’s Fifth Avenue – under the same roof as brands including Louis Vuitton, Christian Dior, Givenchy and Sephora in a company led by Europe’s richest man, Bernard Arnault. 

READ> Why billionaire Bernard Arnault, the world’s third-richest man, likes being number one 

Tiffany took legal action against its French suitor this month, hours after LVMH said the takeover was no longer possible. The Paris-based company said the French government had urged it to delay the transaction to help the country in a trade dispute with the US. 

Pepperman argued that LVMH’s request for a trial next spring was part of a wider strategy to force a delay to create “maximum uncertainty” for the jeweller. 

He claimed LVMH was trying to put Tiffany’s board under “overwhelming pressure” to agree to a price reduction. “They want to acquire Tiffany, but at a lower price than what they agreed to,” he said. 

People close to LVMH said the judge’s decision was not a win for Tiffany as the US group was hoping to get the trial date moved to before Nov 24, the deadline to close the deal.   

LVMH can still decide to walk from the deal after Nov 24 but that can be overturned by the Delaware court during the trial.  

A person following the case said the judge’s choice to set the trial date in early January was an indication that he would like the two companies to reach a compromise agreement before trial. 

Edward Micheletti, partner at Skadden Arps, who represents LVMH, told the court that the “uber aggressive” schedule that Tiffany had mooted was “unworkable” because of the complex nature of the case and other factors including language barriers. 

In response to the ruling, LVMH said that it remained “fully confident that it will be able to defeat Tiffany’s accusations and convince the court that the conditions necessary for the acquisition of Tiffany are no longer met”. 

Tiffany’s chairman Roger Farah welcomed the decision. “We will demonstrate to the court that LVMH is in clear breach of its obligations under a valid and binding agreement and that their claim of a material adverse effect is completely baseless,” he said.

By James Fontanella-Khan, Alistair Gray and Sujeet Indap © 2020 The Financial Times

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