The glamor fusion ends in court

Statistics show that in the European Union there are four marriages and two divorces per 1,000 citizens. The data is from 2017, the last available in the Eurostat service, but it works to understand that at the moment love (or persistence) is gaining. Nothing is said about the length of these marriages, but if the tone is set by how long the relationship between two iconic luxury giants has lasted, by 2020 a very low average awaits it. Tiffany’s and LVMH have been together for nine months and, without finishing the marriage, will be divorced in court.

This week a court in Delaware (USA) has set for January 2021 the date of the trial to determine whether the Moët Hennessy Louis Vuitton (LVMH) group had grounds to break the merger agreement with Tiffany’s.

The famous New York jewelry chain has long been looking for ways to give a boost to the brand after the effect of the phenomenon Breakfast with diamonds it would have been losing strength. To achieve this they decided to be bought by the luxury conglomerate that already managed brands like Louis Vuitton, Dior and Moët & Chandon. LVMH, led by Bernard Arnault, saw the acquisition of the brand’s more than 300 stores as “an exceptional addition” to its “unique portfolio of luxury brands”. This was expressed by Arnault himself months after making the purchase intention public. In a statement, the director stated that “Tiffany’s is an emblematic company with a rich heritage and a unique position in the world luxury jewelry market.”

The operation, a political ball

With this movement, the one who was already the richest man in Europe got a place on the podium of the world’s major fortunes. In fact, at the end of 2019, Forbes pointed to him as the big winner of the year: his fortune had grown by $ 40 billion (about 34.3 billion euros) and exceeded $ 107 billion (about 92,000). million euros). He is currently, with a fortune equivalent to 96.2 billion euros, the third richest person in the world, behind Jeff Bezos (Amazon) and Bill Gates (ex-Microsoft), but ahead of Mark Zuckerberg (Facebook) and Elon Musk (Tesla).

The purchase was agreed for 14.5 billion euros at the end of last year and came to pass the filter of the vote of Tiffany’s shareholders in February. Everything was planned so that in the middle of this year the merger would be done. However, from February to September things got complicated. First for the covid-19 crisis, which has significantly hurt this market segment, but second for Donald Trump: LVMH explained in early September that it had received a letter from the French Foreign Ministry asking the company delay the operation until January 6, 2021 in the face of the US president’s threat to increase tariffs on French exports. This, added to the fact that Tiffany’s would have asked to extend until December 31 the formalization of the purchase (the limit had already been postponed and was set for the end of November) led the French group to back down.

The New York jewelry company responded with a lawsuit, which sought to oblige LVMH “to fulfill its contractual obligation.” “Under the terms of the agreement, LVMH assumed all antitrust liquidation risk and all financial risk related to adverse industry trends,” Tiffany’s justified in a statement. In addition, he argued that the request to delay the formalization of the agreement was in response to the fact that the French group had not yet made the necessary arrangements for various antitrust bodies in the world to give their approval. Bernard Arnault’s empire accused Tiffany’s, therefore, of having a strategy prepared for a long time.

The “mismanagement” of covid-19

The tug-of-war has dragged on all month and now, like any marriage that gets to this point, they only think about convincing the judge that they are the ones who are right. “I will show – said Tiffany’s CEO Roger Farah – that LVMH has breached its obligations and that the arguments to cancel the merger have no justification.” The company in question said at the same time that it was “fully confident” in being able to show that “Tiffany’s mismanagement during the covid-19 crisis is an adverse material effect.”

So now the responsibility lies with the U.S. judicial system, which will have a four-day trial next year to decide whether LVMH had the right to divorce or not.