Despite recent “rumors,” LVMH Moët Hennessy Louis Vuitton says that it will not opt to buy Tiffany & Co. shares on the open market in order to snap up ownership of the jewelry company for less than the $16.2 billion price the parties agreed upon in November. According to a statement that the Paris-based luxury goods group issued on Monday morning, reports that it was potentially looking to buy Tiffany & Co.’s stock on the open market amid a coronavirus-driven slump have lead it to confirming that it “is currently committed not to buy Tiffany shares [on the open market] … in accordance with the [November] agreement.”
Bloomberg reported last week that “people familiar with the matter” revealed that LVMH had “discussed the idea” of purchasing shares on the market with Tiffany’s board, “which could grant permission for the potential purchases to go ahead after earnings,” while noting that LVMH had “not made a final decision on whether to proceed with selective market buying and is discussing possible legal hurdles to the idea.”
The “unusual step,” as Bloomberg characterized it, which comes as the iconic New York-based jewelry brand’s NYSE-listed shares are selling for less than the agreed-upon takeover price, would have enabled the Paris-based group to capture “a near 13 percent discount at recent prices.” Although, it would also “underscore LVMH Chief Executive Officer Bernard Arnault’s commitment to the deal.”
Bloomberg’s Andrea Felsted stated in a separate article over the weekend that that “Tiffany’s stock price [has been] supported by the $135-a-share [deal with LVMH], but touched a year-to-date low of about $111 this [past] week.” Such a “large spread suggests an element of uncertainty the deal will actually close.” While financing the deal in light of the market downturn should not be an issue, Felsted says “the question is whether there is any provision in the fine print of the deal agreement that LVMH lawyers could use to walk away — and whether Arnault would even want to if there was.”
“Wriggling off the hook,” she writes, “would damage Arnault’s reputation” – although it is worth noting that Arnault is known as an aggressive and even ruthless business builder, hence his “‘wolf-in-cashmere clothing” industry nickname, thanks to various hostile takeover attempts in the past, including his group’s (unsuccessful) play for Gucci. It would also “send a terrible message to investors about the strength of LVMH,” which seemed to support reports that the richest man in fashion was looking for other ways “to try to bring down the overall cost of the deal, without trying to renegotiate, or pressing the panic button.”
LVMH’s full statement reads as follows: “Rumors circulated recently indicating that LVMH would consider buying Tiffany shares on the open market. These rumors lead LVMH to recall that, in accordance with the agreement concluded with Tiffany in November 2019, LVMH is currently committed not to buy Tiffany shares.”
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