French luxury goods giant LVMH is pulling out of its $16.2 billion acquisition deal with Tiffany, citing U.S. tariffs over French goods and Tiffany’s request to extend the deal deadline to December 2020.
The agreement, which was signed between the two companies late last year, was meant to be closed by no later than November 20, 2020. In a statement, Louis Vuitton’s parent company LVMH said that it could not complete the acquisition of Tiffany “as it stands,” and that it needs additional time to assess the impact of U.S. tariffs on French goods.
According to CNBC, LVMH received a directive from France’s minister of foreign affairs to defer the deal until after January 6 to assess the threat of American tariffs.
Tiffany, in response, has reportedly filed a lawsuit in a Delaware court to enforce the deal, arguing that the French ministry’s directive has no solid basis in law.
The acquisition talks between the two companies went sour when the coronavirus pandemic impacted the American high-end jewelry retailer’s businesses. Tiffany’s same-store sales saw a sharp 44 percent decline, which in turn casted doubts on whether LVMH had overpaid for the deal. LVMH CEO Bernard Arnault was thus looking to lower the buying price, CNBC reported.
The dispute led the two companies to agree to push the acquisition deadline from August 24 to November 24.
Tiffany’s stock fell by 10 percent when the news broke, which is yet another hit to its $14.8 billion market valuation. The company’s shares have fallen by nearly 9 percent this year.
The Tiffany-LVMH deal isn’t the first to have fallen through in the retail space this year. Mall owner Simon Property Group recently backed out of its bid to acquire high-end mall developer Taubman, which led Taubman to file a lawsuit. Similarly, private-equity firm Sycamore reportedly terminated its deal to acquire Victoria’s Secret from L Brands.