LVMH Renegotiating With Tiffany's?

LVMH Renegotiating With Tiffany's?

over 3 years ago2 mins

Looks like LVMH might be getting cold feet: the luxury conglomerate is trying to renegotiate its acquisition of US jeweler Tiffany & Co 💍

What does this mean?

The French luxury giant agreed to buy Tiffany’s for $16 billion back in November – a deal that would both expand LVMH’s presence in the US and bolster its offerings in the fast-growing jewelry market. But when LVMH’s boss said at the time that Tiffany’s would “thrive for centuries to come”, he probably wasn’t expecting a once-in-a-blue-moon pandemic and historic riots to knock the luxury sector off its perch 👜

That slump’s punished luxury companies’ stock prices – not least Tiffany’s, which has been trading at 10-20% below LVMH’s offer price since March. That means LVMH could buy up Tiffany’s shares on the stock market instead, and end up acquiring the company for less than the $16 billion it’d offered. But it’s said it doesn't want to, and is now trying to get Tiffany’s to agree to a lower price 🤝

Source: The Wall Street Journal
Source: The Wall Street Journal

Why should I care?

The pandemic’s forced several other companies to renegotiate or walk away from deals too. Just last month private equity firm Sycamore Partners called off a $500 million-agreement to take full control of Victoria’s Secret from its owner L Brands 👙 And judging by how much “deal spreads” have widened recently – that is, the difference between the price at which a company agrees to buy an acquiree’s shares and the current price of those shares – investors seem to be expecting plenty more deals to collapse yet.

Source: Business Insider
Source: Business Insider

Luxury goods are nice and all, but there are bigger fish to fry. Data out on Thursday showed a higher-than-expected two million Americans filed for unemployment benefits last week, bringing the total since March to a massive 43 million 😲 That’s even more than in the 18 months after the global financial crisis.

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