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LVMH walks away from Tiffany deal after French government intervention

Paris-based luxury group LVMH has become caught up in a trade dispute between France and the US. It has announced that it will now be unable to complete its proposed acquisition of US brand Tiffany because it has been “directed” to defer its completion by a French government minister.

Unable to complete the acquisition by the existing deadline, November 24, LVMH has now said it will not be able to complete the acquisition at all.

In November 2019,  LVMH announced its intention to acquire Tiffany at a price that valued the US company at $16.2 billion. The original target date for concluding the deal was August 24 this year. When that date came and went without completion, the companies pushed the deadline back by three months.

In parallel, the French government announced a new 3% digital services tax (DST) on e-commerce companies, arguing that these companies’ scant physical presence in France had allowed them to circumvent taxes that other consumer-facing companies have to pay.

This led the US Trade Representative (USTR) to claim that the new tax discriminated against US digital companies such as Google, Apple, Facebook, and Amazon. It said the US would retaliate by imposing additional tariffs on imported products that come into the US market from France, including leather handbags.

In a statement on September 9, LVMH said that, following its August announcement of the postponement of the Tiffany deal, it had received a letter from France’s minister of foreign affairs, Jean-Yves Le Drian, “directing” it to postpone the Tiffany deal until 2021. It said this was “in reaction to the threat of taxes on French products by the US”.

LVMH said its board had decided to “comply with” the merger agreement establishing November 24 as the deadline, and that, therefore, the group would not be able to complete the Tiffany deal “as it stands”.

Please see separate news story on Tiffany’s response.

Image: Louis Vuitton





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