LVMH launches legal counterattack against Tiffany - France 24

New York (AFP)

The luxury giant LVMH launched the legal counterattack against Tiffany, justifying its decision not to buy the American jeweler by its mismanagement in times of pandemic and by a request from the French government.

The $ 16.2 billion marriage of the two groups, announced with great fanfare at the end of 2019, was shaping up to be the union of the century in the luxury world.

But the romance began to fail when LVMH estimated at the beginning of September to be "no longer able" to acquire "as is" Tiffany, who immediately filed a complaint.

In response, the group of Bernard Arnault, owner of Louis Vuitton, Dior and Moët & Chandon champagnes among others, filed Monday evening its findings in a Delaware court.

"The group is confident in its ability to demonstrate that the conditions for the completion of the acquisition are not met and that the fallacious arguments supported by Tiffany are completely unfounded," said LVMH in a press release Tuesday.

The group had already announced its intention not to stop there and in turn to seize American justice.

He therefore implemented this threat on Monday by filing a new document with the court.

The jeweler retaliated during the day, believing once again that the French company was only seeking to evade its commitments and not to pay the price on which they had agreed.

"Tiffany has acted in full compliance with the merger agreement, and we are confident that the Court will agree at the trial," said Chairman of the Board Roger Farah, quoted in a statement.

- A letter at the heart of the debates -

One of the central points of the case concerns a legal clause defining a "significantly unfavorable situation", known under the English name of Material adverse effect (MAE).

For LVMH, "the pandemic - the effects of which for Tiffany are catastrophic and lasting - undeniably constitutes a significantly unfavorable situation".

The agreement signed in November 2019 includes this clause "provided that the event invoked under this clause has not been explicitly excluded by the parties", details the group.

However "the absence of the mention of an exclusion of the pandemic in the definition of the significantly unfavorable event in the agreement concluded with Tiffany is indisputable", underlines the giant of the luxury.

If certain events "such as cyber attacks, the movement of yellow vests or the demonstrations in Hong Kong" had been planned, this is not the case for a health crisis "while hundreds of merger agreements carried out over the past ten years provide for this specific mention ", adds the press release.

The group also takes the example, in its complaint consulted by AFP, of a contract at 6.8 billion dollars, "executed the day before" that with LVMH, and negotiated by the lawyers representing Tiffany, which provided for this exclusion.

For Tiffany, LVMH is completely wrong: invoking this clause "is not based on any factual, contractual or legal element".

And if the jeweler has taken losses during a quarter, it has regained its profitability "and expects results in the fourth quarter in 2020 superior to those of the same period in 2019".

The payment of a high dividend when the company was suffering losses is also part of the criticisms leveled by LVMH against the American jeweler.

But these payments were "provided for by the agreement," retorts Tiffany, stressing that it has never suspended or reduced its dividends for nearly 33 years.

A letter from the French Foreign Minister is also at the heart of the debates.

LVMH brandished this letter from Jean-Yves Le Drian asking it to defer the acquisition in view of the ongoing trade war with the United States to justify its withdrawal.

The minister subsequently assured the French deputies that he had with this letter "responded to a request from the LVMH group."

This solicitation clearly violates the agreement between the two groups, believes Tiffany, who claims to have never seen the original version of this letter despite repeated requests.

During the day Tuesday, LVMH also told AFP that it had received the green light from the Taiwanese competition authorities, the penultimate that they lacked before that of the European Union expected in October, which they said demonstrates that the group has fulfilled all of its obligations under the contract.

The American justice fixed last week at January 5, 2021 as the date of the trial to oppose the two groups, however suggesting that the two parties resume dialogue.

© 2020 AFP