TOPLINE
Shares of Tiffany & Co. plunged on Tuesday after a report that its blockbuster $16.2 billion takeover by luxury goods giant LVMH, which would have been the biggest luxury brand deal ever, is now looking less likely to go through.
Trading was briefly halted as the jeweler’s stock plunged.
Budrul Chukrut/SOPA Images/LightRocket via Getty Images
KEY FACTS
LVMH’s board called a meeting in Paris specifically to discuss the takeover, with management expressing concerns about a deteriorating situation in the U.S. market, fashion trade publication WWD first reported.
The luxury goods giant is apparently reconsidering its $16.2 billion buyout of Tiffany amid the economic fallout from the coronavirus pandemic and the social unrest caused by widespread protests over the killing of George Floyd.
LVMH is also reportedly concerned about Tiffany’s ability to repay all its debt obligations after a takeover gets completed; the deal had originally been expected to close in mid-2020.
No firm decision was made at Tuesday’s meeting, but board members made clear that the acquisition should be reconsidered, sources told WWD.
Tiffany shares plunged on the news, down by 11% at one point, with trading briefly halted at 3:22 p.m. EST, before ending the day down 9%.
At the luxury jeweler’s annual shareholder meeting on Monday, Tiffany notably didn’t specifically mention any challenges related to the coronavirus, the widespread protests across the country or the LVMH takeover.
Key background
LVMH originally reached a deal to buy Tiffany & Co. in November 2019. The agreed upon purchase price was for $135 per share ($16.2 billion in cash). At the time, many analysts credited LVMH’s billionaire owner, Bernard Arnault, for his savvy dealmaking: The deal was heralded as strengthening LVMH’s presence in North America and building on its foundation in the jewelry market.
Tangent
As the coronavirus pandemic caused widespread business closures, global mergers and acquisitions were largely put on pause. Many companies were forced to abandon takeover deals altogether, as they struggled to stay afloat and pay workers. Xerox, for instance, walked away from its $35 billion bid for rival printing company HP. The M&A pipeline has slowed as companies struggled to do business amid a lack of debt financing and restricted face-to-face contact for business deals. A good amount of remaining M&A activity, however, will likely be dominated by rescue deals and restructurings, as companies struggle to cope with the negative economic impacts from coronavirus.
What to watch for
Tiffany shares are still up 30% in the last twelve months, in large part buoyed by the prospect of a takeover by LVMH. If the massive deal does fall through, however, investors will likely reassess—especially given the challenging economic backdrop for retailers today.
Further reading
Louis Vuitton Owner LVMH Buys Tiffany For $16.2 Billion (Forbes)
Mass Protests Across The U.S. Have No Impact On Stocks, What Gives? (Forbes)
Stocks Turn Positive After Trump Keeps Phase One China Trade Deal Intact (Forbes)
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