People familiar with the matter said that Tiffany’s board of directors has agreed to slightly lower prices to sell American jewelers to Louis Vuitton (LVMH), ending the fierce conflict triggered by the Covid-19 pandemic, which has the potential to make the luxury industry ever The biggest acquisition activity is derailed. .
People familiar with the matter said that the French luxury goods group will acquire the American jeweler at a price of $131.50 per share, while the prices behind brands such as Louis Vuitton and Christian Dior are lower than the original price. At $135, the company’s market value is approximately $15.8 billion. In addition, Tiffany will also pay a dividend of $0.58 per share to shareholders.
The two sides will also settle a duel lawsuit filed in Delaware in September, which was triggered when LVMH threatened to withdraw from the transaction.
People familiar with the matter said the Tiffany board of directors approved the revised terms at a meeting on Wednesday night. The new terms of the agreement will have to be approved by Tiffany shareholders. Two people with direct knowledge of the matter said that given the recent antitrust licenses obtained in Europe, the transaction may be completed in January.
It is not clear to us why LVMH and its legal team will continue the actions they have taken since the beginning of September to ensure that there is a minimum discount to the initially agreed terms
The peace agreement means that LVMH’s billionaire founder Bernard Arnault will save about $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
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.
Some analysts questioned why LVMH launched a war with Tiffany, which ultimately led to relatively mild price cuts. “If it is confirmed, the magnitude of the price adjustment will be strange. Jefferies analyst Flavio Cereda wrote before the statement: “We don’t know why LVMH and its legal team will continue to adopt Actions taken since the beginning of the month 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.
However, Covid-19 has changed the outlook for the luxury industry, as stores have been forced to close down and travel restrictions usually prevent free-spending Chinese tourists from traveling abroad. Analysts predict that this year’s sales in the industry may fall by 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 share price reversed its nearly 35% decline earlier this year, and the current transaction price is about 402 euros, only 8% below its historical high.
As Europe and France will suffer the second round of lock-in, France and Germany will close non-essential businesses in the next few days, so the recovery of the industry may be in danger.
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