All it took was a discount of $400 million.
The bitter brouhaha between LVMH Moët Hennessy Louis Vuitton and American jewelry firm Tiffany & Co. is finally over now that the two parties have agreed to put their differences aside, settle their legal dispute and modify certain terms of their merger agreement.
Under the new terms, LVMH will acquire Tiffany at a per-share price of $131.50 in cash, down from $135. That’s a $400 million discount, with the new purchase price totaling $15.8 billion instead of $16.2 billion.
“This balanced agreement with Tiffany’s Board allows LVMH to work on the Tiffany acquisition with confidence and resume discussions with Tiffany’s management on the integration details. We are as convinced as ever of the formidable potential of the Tiffany brand and believe that LVMH is the right home for Tiffany and its employees during this exciting next chapter,” Bernard Arnault, LVMH’s president and CEO, said.
The two firms inked their initial agreement in November, and were awaiting the requisite regulatory approvals. Arnault has long had his eye on acquiring Tiffany, though acquisition price was a potential sticking point.
But in September, nearly a year after the deal was signed, LVMH balked, even going so far as raising a U.S.-France trade dispute over a digital services tax and—in a bizarre turn—describing a letter from the French European and Foreign Affairs Minister suggesting a delay as a “governmental order.”
Many Wall Street analysts presumed that a deal would happen once the purchase price dropped.
“We believe long-term synergies remain significant and a deal is most likely to close at a reduced price of $120 to $130; however, geopolitical risk could call the deal off, and this is a new and relevant factor,” Oliver Chen, Cowen & Co.’s luxury and retail analyst, said when the deal blew up. Chen wasn’t far from the final number, which at $131.50 per share was just a hair above the high-end of his prediction.
“We are very pleased to have reached an agreement with LVMH at an attractive price and to now be able to proceed with the merger. The Board concluded it was in the best interests of all of our stakeholders to achieve certainty of closing,” Roger N. Farah, Tiffany’s chairman, said.
“We continue to believe in the power and value of the Tiffany brand and the compelling long-term strategic and financial benefits of this combination,” added Tiffany CEO Alsessandro.
The board of both companies have already approved the new agreement and the merger is expected to close in early 2021.