Louis Vuitton owner LVMH has scrapped its USD 16.2 billion acquisition of Tiffany. The deal was expected to be the biggest ever in the history of the luxury industry. The merger agreement was signed in November last year. The French luxury-goods giant said on Wednesday that the deal provides for a closing deadline no later than November 20, 2020. But the US jeweler had requested to extended the deadline to December 31, 2020. The French group has received a letter from the French foreign affairs ministry directing the company to delay the deal beyond January 6, 2021. The direction was given considering the threats of additional taxes by the US on French products.
The company has issued a statement saying that it is not in the condition to complete the process of acquisition of Tiffany ‘as it stands.’ The French luxury goods company said that it will need more time to analyse any impact from additional US tariffs on French goods. This is why it is not in the position to close the deal before the end of the year 2020. Soon after the announcement, shares of Tiffany tumbled. The market value of its share is around USD 14.8 billion and they have fallen nearly 9 percent this year.
Tiffany has responded not to the development but reports claim that the US jewelry has filed a lawsuit. The lawsuit, filed in Delaware, says that the request by the French government has no basis in law. The global coronavirus pandemic has badly affected the luxury retail sector. This resulted in a 44 percent decrease in same-store sales of Tiffany. This put LVMH in doubt and investors were worried that whether the luxury giant overpaid. People familiar with the development said that Chief Executive Officer Bernard Arnault was looking to lower the price of the deal. As talks started to sour, the initial deadline of August 24 was pushed back to November 24. At that time, analysts had predicted that the transaction will still see the light of the day but at a lower price.