Louis Vuitton countersues Tiffany over failed acquisition deal

LVMH (Moët Hennessy Louis Vuitton), the world’s largest luxury group based out of France, has countersued US based luxury retailer Tiffany & Co.

 LVMH, which owns global luxury brands such as Dior, Givenchy and Louis Vuitton, claims that the famous US jeweler’s financial mismanagement in the pandemic allows the French luxury goods giant to step away from the company’s proposed $16 billion acquisition deal. 

The move comes after Tiffany sued LVMH earlier this month, objecting to the decision of the Paris-based company not to go ahead with the agreement they signed in November because of a request from the French government and the effects of the coronavirus outbreak. They accused LVMH of trying to use the pandemic-induced downturn in the luxury sector to negotiate a lower acquisition price.

In a counter lawsuit filed in the US, LVMH said Tiffany was mismanaged during the pandemic and is especially vulnerable to the disruption that the industry is likely to experience in the years to come. LVMH claims that Tiffany has experienced a major shift in its business, triggering a common clause in acquisition agreements that allows the buyer to walk away.

The French company also alleged that Tiffany had broken its agreement to function as usual by paying the highest dividend possible.

LVMH reported that it was unable to close the agreement with Tiffany because it received a letter from the French government asking the conglomerate to postpone the deal until next year, past the contractual deadline decided by the companies which was 24 November.

LVMH also said that if the deal continues, Tiffany stands to benefit “even more” than as a stand-alone company. According to the counterclaims, Tiffany’s top five executives are in line to receive at least $100 million in gross compensation if the deal goes forward.

Tiffany had, earlier, challenged LVMH’s claim that it was prevented by the interference of the French government from completing the agreement and that there had been a material adverse impact. Under its deal with LVMH, it also defended its right to pay out dividends.

The judge who heard the arguments said he hoped Tiffany and LVMH might have “productive negotiations to prevent the need for litigation,” referring to a possible settlement.