A day after the New York-based luxury jewellery retailer Tiffany & Co. said it is suing LVMH for breaching a merger agreement, the French conglomerate called the move “unfounded” and pledged to take its own legal action.
The world's biggest luxury group said it "was surprised by the lawsuit filed by Tiffany" against in a Delaware court, and "considers that this action is totally unfounded," according to a regulatory filing on Thursday.
“It has clearly been prepared by Tiffany a long time ago and communicated in a misleading way to shareholders and is defamatory,” LVMH said.
“LVMH will defend itself vigorously. The long preparation of this assignment demonstrates the dishonesty of Tiffany in its relations with LVMH," it added.
LVMH's share price was down 0.77 per cent, trading at €400.95 on Thursday at 2:48pm UAE time while Tiffany's stock price was up 0.64 per cent in pretrading at $113.96.
On Wednesday LVMH said it was backing out of the $16 billion (Dh58.7bn) acquisition of Tiffany because of US tariffs slated to
be imposed on French goods and a request from the French government to refuse to delay the transaction until January 6, 2021.
In a court filing on Wednesday Tiffany said there was no contractual basis for LVMH to honour the request from the French government. Last month, it also extended the deal deadline by three months, to November 24. That led LVMH to say it retains the right to challenge the new closing date.
In its statement on Thursday LVMH, run by Bernard Arnault, the world's fourth richest man, dismissed Tiffany's accusation that it failed to take the necessary steps to obtain regulatory approvals in a timely manner and said the allegation "has no substance".
The Louis Vuitton owner went on to say its board assessed the financials of Tiffany and "its management of the crisis", in reference to the Covid-19 pandemic's impact on the retail industry. It said the jeweller's first half results and performance for 2020 "are very disappointing and significantly inferior to those of comparable brands of the LVMH Group during this period".
Tiffany's net earnings fell nearly 77 per cent to $31.9 million in the three months ended July 31, from a year earlier. The company's global sales fell 29 per cent to $747.1m in the same period. The onset of Covid-19 led countries to impose lockdowns and movement restrictions to contain the pandemic. That crimped economic growth, disrupted supply chains and dented the sales of the global luxury goods market.
As a result of the situation, LVMH said in its statement on Thursday, it was led to challenge "the handling of the crisis by Tiffany's management and its board".
The French powerhouse added it considers, among other things, that this period is affected by a situation of force majeure or Material Adverse Effect.
LVMH also maintains that "Tiffany did not follow an ordinary course of business, notably in distributing substantial dividends when the company was loss making and that the operation and organisation of this company are not substantially intact".
Therefore, it said "the necessary conditions for the conclusion of the acquisition of Tiffany are not fulfilled".
