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LVMH agrees to buy Tiffany at a slightly lower price



LVMH has agreed to continue the acquisition of Tiffany at a slightly lower price, approved a $15.8 billion transaction, and ended the fierce conflict caused by the Covid-19 pandemic that may derail the largest acquisition in the history of the luxury goods industry.

Behind the French luxury goods group are the successors of brands such as Louis Vuitton and Christian Dior. The company said on Thursday that it will acquire the American jewelry for $131.50 per share. At a lower price than the original price of US$135, the company’s market value is approximately US$15.8 billion. In addition, Tiffany will also pay a dividend of $0.58 per share to shareholders.

The two companies said in a joint statement that they will settle a duel lawsuit filed in Delaware in September, which was triggered when LVMH threatened to withdraw from the transaction.

The two groups of boards approved the revised terms at their respective meetings on Wednesday night. The new terms of the agreement will have to be approved by Tiffany shareholders, so the transaction is expected to be completed early next year. All antitrust licenses have been obtained.

The peace agreement means that Bernard Arnault, the billionaire chairman and CEO of LVMH Group, will save approximately US$425 million, or less than 3%, from the original price.

This also shows that Mr. Arnott, who is known as a fierce negotiator, has established his own empire through acquisitions. Even if he fought for a few months at a lower price, he did not want to give up the acquisition. After the outbreak of the coronavirus pandemic earlier this year, he allowed LVMH̵

7;s lawyers to cross-talk Tiffany’s performance in Tiffany’s legal documents, and expressed its “bleak” prospects for the future.

The richest man in France has now forgotten this critinism. “We are convinced of the great potential of the Tiffany brand and believe that in this exciting next chapter, LVMH is the right place for Tiffany and its employees,” Arnott said in a statement.

Roger Farah, chairman of Tiffany, stated that the board concluded that this compromise is in the “best interests of all stakeholders to ensure the certainty of the deal.”

He added: “We are very pleased to reach an agreement with LVMH at an attractive price and we are now able to merge.”

The deal was originally signed a year ago, but after LVMH announced in September that it must withdraw from the deal, the French government requested that the acquisition be postponed due to trade tensions between Paris and Washington, and the deal was shaken. Prior to this, Arnott had tried many times to lower the transaction price, but without success, he claimed that this pandemic has fundamentally changed the value of Tiffany.

Then, Tiffany (Tiffany) defended himself, filed a lawsuit, forcing LVMH to complete the transaction in accordance with the original terms.

Some analysts questioned why LVMH finally triggered a war with Tiffany with a relatively modest price cut. Jefferies analyst Flavio Cereda wrote in a report before the announcement: “If it is confirmed, the magnitude of the price adjustment will be strange.” “We are not yet It is clear why LVMH and its legal team will continue the actions they have taken since early September to ensure that there is a minimum discount to the initially agreed terms.”

But Mr. Cereda said that the strategic basis for this cooperation is still valid because LVMH Group hopes to expand its watch and jewelry business, which is smaller than rivals such as Richemont, which owns Cartier.

Last year, such “hard luxury goods” accounted for only 8% of LVMH’s sales and 6.5% of operating profits, and most of its profits came from “soft luxury goods” such as Louis Vuitton handbags and clothing.

Covid-19 shook the prospects of the luxury goods industry because shops were forced to close down and travel restrictions prevented Chinese tourists who normally spend freely from international travel. Analysts predict that this year’s sales in the industry may fall by as much as 30%, and it may take up to three years to recover.

The stronger-than-expected third-quarter sales of LVMH and Hermes have recently sparked hopes for a rebound, as consumers in Asia and the United States again started buying luxury goods this summer. LVMH’s stock price reversed its nearly 35% decline earlier this year and is currently trading at approximately 402 euros, which is only 8% below its historical high.

Now, as Europe and France implement the second round of blockades, the industry’s recovery may be in jeopardy. France and Germany will close non-essential businesses in the next few days.


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