LVMH has managed to negotiate a $425m discount for its purchase of luxury jeweler Tiffany, ending the months long legal dispute between them. LVMH will pay now pay $15.8bn, down from the $16.2 billion previously agreed, following a bitter dispute triggered by the Covid-19 pandemic, that soured their relationship.
LVMH announced in September that it would abandon its planned acquisition of Tiffany, which was expected to be the biggest luxury goods deal in history. LVMH said that a trade fight between Brussels and Washington had forced it to scrap the agreement, though some, more cynical observers, believed it was an attempt to renege on the deal in light of the luxury industry’s collapse during the coronavirus pandemic.
Tiffany argued that the decision had no legal grounds. The company sued the French based LVMH in a Delaware court for breaching its obligations. In turn, LVMH countersued, claiming that the pandemic had seriously damaged the US jeweler’s business and carried “devastating and lasting” effects. Just today, the World Gold Council said in its third-quarter demand trends report that global gold jewelry demand dropped 29%, down from the third quarter of 2019. So far this year, jewelry demand has totaled 904 tonnes.
With a market cap of more than $200 billion, LVMH is one of the biggest luxury companies in the world and home to 70 luxury brands including Gucci, Louis Vuitton and Christian Dior. However, when it comes to “hard luxury” — jewelry and watches — it has long lagged behind rival Richemont. In 2018, Richemont’s revenue from the hard luxury segment totaled €9.16 billion, compared to just €4.2 billion for LVMH. The acquisition of Tiffany is seen as an attempt by LVMH to boost its hard luxury sales and put it within striking distance of its rival.
“We are as convinced as ever of the formidable potential of the Tiffany brand and believe that LVMH is the right home for Tiffany,” LVMH CEO Bernard Arnault said in a prepared statement.
Other key terms of the deal which was was initially agreed in November, remain unchanged. Although the boards of both Tiffany and LVMH have yet to formally approve the agreement, it is expected that the final deal will go through in January 2021.