Tiffany & Co. chairman Roger Farah let loose on Bernard Arnault’s LVMH Moët Hennessy Louis Vuitton, which is trying to walk away from its $16.2 billion deal to buy the American luxury brand.
The jeweler sued LVMH in Delaware Chancery Court last week after LVMH said it was dropping the deal, citing a request to delay closing from the French government, which is in the midst of a trade spat with Washington.
In the suit, Tiffany argued that LVMH was slow-walking the regulatory approval of the agreement in the European Union after the coronavirus reset the competitive landscape. But in a statement late Wednesday, the company said LMVH is opposing its efforts to hold an expedited trial and asked the court to hold off for six or seven months.
Farah, who negotiated the deal, said: “LVMH’s opposition to our motion to expedite is the latest attempt to run out the clock to avoid fulfilling its obligations under the merger agreement. If LVMH were confident in its legal position, it would have no reason to oppose an expedited trial schedule. We urge the court to hold the trial on a timetable that will enable a decision before the Nov. 24 termination date in the merger agreement.”
He said Tiffany was not for sale when LVMH came knocking last fall and that the company only sold once the price was increased five times — to $135 a share in what he described as an “ironclad contract.”
“For many months, LVMH has been grasping at any opportunity to delay and avoid its obligations,” Farah said. “This includes excuses for failing to make standard antitrust filings, complaints about the pandemic and protests that LVMH previously agreed could not be considered as a valid reason to question the transaction. Then, LVMH produced a non-binding advisory letter from a French government official that requests further delay in closing. However, this letter does not change LVMH’s obligations to close immediately upon receipt of the required regulatory approvals. LVMH’s shifting explanations indicate bad faith in its dealings with Tiffany and are nothing more than distractions meant to hide its efforts to run out the clock and avoid fulfilling its obligations.”
Farah said LVMH does not have the right to unilaterally exit the deal or to reduce its price “just because it is now suffering from a case of buyer’s remorse.”
After Tiffany filed suit to keep LVMH in the deal, LVMH fired back last week and said the legal action was “totally unfounded” and vowed to “defend itself vigorously.”
LVMH said it was working through the regulatory approvals and also said it was disappointed in how Tiffany was managed during the coronavirus crisis.
“The first-half results and its perspectives for 2020 are very disappointing, and significantly inferior to those of comparable brands of the LVMH Group during this period,” it said.
Alessandro Bogliolo, Tiffany chief executive officer, stepped up to defend the company’s performance.
“LVMH’s allegations regarding mismanagement are both untrue and legally irrelevant,” Bogliolo said. “We have already returned to profitability and expect to remain profitable for the balance of the year, with fourth-quarter profits actually exceeding those of the fourth quarter of 2019. Tiffany’s brand, style, sophistication, unparalleled design and unique heritage have inspired customers since 1837 and will continue to do so long after this pandemic is over. The only standard under the merger agreement is whether Tiffany has breached its covenants — and we have not.”
Tiffany in its statement also argued that there has been no “material adverse effect” — referring to a clause in the contract that makes allowances for when a company is hit particularly hard by some negative effect.
“Any impact from the COVID-19 pandemic and U.S. social justice protests cannot even be considered in determining whether an MAE has occurred,” Tiffany said.
The jeweler also maintained that the merger agreement required that it continue to pay dividends, where LVMH has pointed to the dividends as outside the ordinary course of business when the firm was losing money during the COVID-19 shutdown.
And all of that seems to be just preamble. The real show could come next week when the two are due to meet in a Delaware court.