Tiffany & Co. (NYSE:TIF) Takeover To Cost LVMH $400 Million Less

France Conglomerate LVMH has reached an agreement to acquire New York Jeweler Tiffany. The deal ends a long-running standoff that had threatened the $16 billion deal. The new deal will see LVMH paying 131.50 a share, representing a $400 million discount from the initial deal that valued Tiffany at $135 a share.

Tiffany LVMH Merger

While the new deal values Tiffany at $15.8 billion, it is still the biggest luxury goods deal in history. The two agreeing on the discounted deal brings to an end a protracted standoff that had pulled the U.S and French government into the mix.

In September, the deal was on the brink of collapse after LVMH claimed it had been ordered to go slow as a trade war between Brussels and Washington escalated. However, some analysts hit back, reiterating that the allegations were part of LVMH strategy of pushing to renegotiate the sale.

Tiffany had also hit back, suing the French company on claims it had breached its obligations as per the initial agreement. A week later, the French company countersued, reiterating that the COVID-19 pandemic had affected Tiffany core business as well as valuation.

Company’s valuations have taken a significant beating in the aftermath of the COVID-19 pandemic. With brick and mortar business coming to a halt, companies are unwilling to pay big premiums to acquire smaller entities.

Why Tiffany

The acquisition is a major coup for LVMH as it will now be able to better compete against rival Swiss Jeweler Richemont. It should be able to cement its position in the high-end watches business. Watches and jewelry has always been LVMH’s weakest division. In addition, it should help LVMH boost its presence in the U.S, even though it has preens with Givenchy and Dior brands.

Tiffany shareholders must agree and approve the discounted deal for it to go through. If everything goes well, the deal should close early next year and is not expected to interfere with Tiffany dividend payments until January.