Tiffany & Co. shot back at LVMH Moët Hennessy Louis Vuitton on Tuesday, calling the French luxury giant’s counterclaims in a Delaware court “baseless and misleading.”
The two have been fighting since LVMH said this month it was walking away from its $16.2 billion acquisition of the U.S. jeweler — which would have been the largest deal in LVMH chief Bernard Arnault’s long and storied career.
LVMH has argued that Tiffany performed so badly during the pandemic that the company it wanted to buy is no longer there, that it has the right to leave the deal under the contract and that French authorities have compelled it to hold off on the transaction due to a brewing U.S.-France trade war.
“LVMH’s specious arguments are yet another blatant attempt to evade its contractual obligation to pay the agreed-upon price for Tiffany,” said Roger Farah, chairman of the New York-based jewelry company.
“Tiffany has acted in full compliance with the merger agreement, and we are confident the court will agree at trial and require specific performance by LVMH,” Farah said. “Had LVMH actually believed the allegations made in its complaint, there would have been no need for LVMH to procure the letter from the French Foreign Minister as an excuse for its refusal to close.”
While much of the legal argument turns on familiar points — with lots of attention paid to what the material adverse effect clause in the contract does and does not stipulate — the involvement of the French government is an unusual wrinkle.
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When LVMH first said it wanted to drop the deal on September 9, it pointed to a letter from France’s Minister for Europe and Foreign Affairs, which “asked LVMH to defer the transaction.” The company has since expanded its rationale to nix the acquisition, but its counterclaims also flesh out its thinking on the letter, saying that it compels them in terms that have “a (polite) mandatory meaning under French law.”
In its response, Tiffany pointed to additional evidence of “bad faith” when it comes to the involvement of the French government.
Tiffany noted: “LVMH subsequently asserted publicly that the letter was not solicited by LVMH. However, on the floor of the French parliament last week, the minister who signed the letter admitted that he only sent the letter in response to an inquiry from LVMH.”
The jeweler said it has still not received a copy of the letter in its original French and that “LVMH’s seeking this letter was a clear violation of its obligations under the merger agreement, and Tiffany anticipates that more of LVMH’s duplicity will come to light during the trial.”
That trial is set for early January with the hopes that a deal — if warranted after appeal — could go through before the U.S. authorization of the transaction expires February 3.
In the meantime, the two sides seem likely to continue to trade barbs on any number of fronts, including how Tiffany has reacted to the pandemic, from closing its stores to paying its dividend.
Tiffany said Tuesday it closed certain stores before compelled to by law to protect employees and customers when the pandemic hit and that it had a long history of paying dividends even in tough times and a carve out to keep paying them in the merger contract.
“Dating back to shortly after its 1987 IPO, Tiffany has never missed or reduced a dividend payment, even during recessions, financial crises and the September 11 attacks, spanning 131 consecutive quarters,” Tiffany said.
LVMH in its filing argued that Tiffany’s top executives would fare better under the deal than if they had to continue operating the company in “its wounded state” and so are fighting for the transaction.
“Tiffany’s ceo, Alessandro Bogliolo, alone stands to receive a change of control payout in excess of $44 million. His golden parachute is equivalent to Tiffany’s losses in the first half of 2020,” LVMH said, noting Tiffany’s top five executives are in line to get about $100 million collectively.
Bogliolo, for his part, did not address the golden parachute jab, but instead seemed to be trying to buck up his employees, who no doubt are watching warily as their one-time suitor now disses the company.
“I am so proud of how Tiffany has gone above and beyond during the pandemic to deliver our brand mission and keep delighting our customers, even in the most uncertain of times,” Bogliolo said. “I want to thank the entire Tiffany team for their continued professionalism and dedication in the face of baseless accusations and misinformation.”
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