(Bloomberg) — LVMH countersued Tiffany & Co. weeks after pulling out of its $16 billion purchase of the iconic New York-based jeweler, saying the decision was driven by the French government’s request to delay the deal’s closing and Tiffany’s mismanagement during the pandemic.
The maker of Louis Vuitton bags and Moet & Chandon Champagne contends Tiffany’s business was devastated by the coronavirus outbreak and that provides proper grounds to nix the buyout, according to a filing Monday in Delaware Chancery Court.
Tiffany sued LVMH earlier this month to force it to go forward with the deal, saying in a court filing that LVMH is trying to use the pandemic-induced downturn in the luxury sector to negotiate a lower acquisition price.
In its counterclaims, LVMH also cited a letter from French Foreign Minister Jean-Yves Le Drian seeking a delay in closing the transaction as part of a trade war with the U.S. The letter amounts to a “legal restraint” under the terms of the buyout that prohibits the deal from closing by a Nov. 24 deadline, LVMH’s lawyers noted in the 96-page filing.
Tiffany executives said they couldn’t immediately comment Monday on LVMH’s countersuit. They have said in earlier filings that LVMH deployed the minister’s letter as a pretext to wrongfully pull out of the purchase.
Judge Joseph Slights III has set a Jan. 5 non-jury trial to decide whether LVMH must consummate the sale.
Le Drian on Sunday called “excessive” the controversy surrounding his missive. “It’s my duty to protect French interests,” he told Le Parisien newspaper in an interview. “Regarding the trans-Atlantic situation, the trade disagreements we have are known. It was therefore my role to inform LVMH of my political appraisal of the moment.”
Bloomberg News on Sept. 10 reported that Le Drian wrote the letter after LVMH Chief Executive Officer Bernard Arnault leaned on the government for support in wiggling out of the takeover.
The deal was announced last November, but friction between LVMH and Tiffany emerged in March as the depth of the economic fallout from the pandemic became apparent. Tiffany contends LVMH is angling to force a price cut in the deal.
LVMH noted Tiffany’s losses tied to the Covid-19 pandemic are more significant than those suffered by the luxury retailer during the 2008 so-called Great Recession triggered by the collapse of mortgage-back securities. “The business LVMH proposed to acquire in November of 2019” no longer exists, the French company said in its countersuit.
The case is Tiffany & Co. v. LVMH Moet-Hennessy-Louis Vuitton SE, 2020-0768, Delaware Chancery Court (Dover).
(Updates with French minister’s comments in sixth paragraph)
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