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So, LVMH is trying to walk away from TIF. Again. And LVMH has finally said in a press release that it is not able to close the transaction (although I don't see a notice of termination being mentioned by anyone).
LVMH press release:
https://ml-eu.globenewswire.com/Resource/Download/68a5d495-cb19-4f44-b278-a4ce669bccfe
LVMH press release:
https://ml-eu.globenewswire.com/Resource/Download/68a5d495-cb19-4f44-b278-a4ce669bccfe
The press release states that the French government has "directed" LVMH to defer the acquisition past 06 Jan 2021 because of France-US trade disputes. But the long stop date for the TIF transaction is 24 Nov 2020, so, whoops, sorry Tiffany, we'd love to close but we can't.
One of the conditions to the TIF deal, like most deals, is that there is no Legal Restraint enacted by any government against the deal.
It's hard to tell how much legal force this government "direction" has, and we don't have the original text.
It's hard to tell how much legal force this government "direction" has, and we don't have the original text.
But TIF has helpfully filed the English translation of the letter provided by LVMH, and it can be found here:
https://www.sec.gov/Archives/edgar/data/98246/000119312520241494/d77283dex992.htm
https://www.sec.gov/Archives/edgar/data/98246/000119312520241494/d77283dex992.htm
So. According to this letter, French companies need to re-evaluate investments in sectors that could be subject to US sanctions.
My interpretation is that French companies shouldn't increase their exposure to luxury, because that gives the US more negotiating leverage.
My interpretation is that French companies shouldn't increase their exposure to luxury, because that gives the US more negotiating leverage.
But... LVMH isn't planning to move TIF's US manufacturing base to France? So why are tariffs relevant at all? If anything, doesn't this deal actually diversify the risk of US tariffs for LVMH?
Additionally, the letter states quite clearly that LVMH "*should* defer the closing of the pending Tiffany transaction".
When governments definitively block deals, the language is typically quite a bit harder than "should". It seems difficult to argue this is a Legal Restraint.
When governments definitively block deals, the language is typically quite a bit harder than "should". It seems difficult to argue this is a Legal Restraint.
Up to now, governments blocking M&A deals to advance trade and economic policy have mostly been limited to China on semiconductor deals (NXPI). Even then, at least China has had the courtesy to block deals under the guise of competition regulation via MOFCOM / SAMR.
For France to *explicitly* block a binding, commercially-negotiated M&A deal between two private companies on the grounds of trade policy is a huge step.
TIF are understandably quite cross, and state in their press release, "the simple facts are that there is no basis under French law for the Foreign Affairs Minister to order a company to breach a valid and binding agreement". https://investor.tiffany.com/news-releases/news-release-details/tiffany-files-lawsuit-against-lvmh-enforce-merger-agreement
This shouldn't hold up. If it does, it gives every French company a license to walk away from any M&A deal as long as they have a friendly contact at the French foreign ministry.
Which is why TIF are suing LVMH to enforce the merger agreement. Grab the popcorn.
Which is why TIF are suing LVMH to enforce the merger agreement. Grab the popcorn.
*LVMH CFO: `NEVER CROSSED OUR MIND' TO RENEGOTIATE PRICE
