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Deal size could approach $40 billion as NTT looks to acquire shares of Docomo it doesn’t already own

TOKYO— NTT Docomo Inc., Japan’s top cellphone service provider, said it planned to return to 100% control by its parent, Nippon Telegraph and Telephone Corp., in a deal expected to cost the parent nearly $40 billion.

The parent NTT owned 66.2% of Docomo’s voting rights as of March 31. Docomo said Tuesday that NTT planned to take 100% control. It said its board would vote on the plan later in the day. The Nikkei newspaper and other Japanese media earlier reported the plan.

Publicly traded Docomo shares were collectively valued at nearly $30 billion as of the close of Monday’s trading. Assuming NTT pays a premium to acquire all the shares, it could spend close to $40 billion.

Shares of the parent NTT were down about 3% in morning trading in Tokyo. Docomo shares weren’t trading yet because of a flood of buy orders.

The deal would end a 22-year experiment that began when fixed-line telephone service was still the NTT conglomerate’s core business and mobile phones were owned by relatively few people.

By listing its mobile-phone unit in 1998, NTT allowed investors to bet on the fast-growing service.

During the turn-of-the-century internet bubble, Docomo was one of the world’s most valuable companies, briefly earning a market capitalization of more than $300 billion in February 2000 as it pioneered mobile internet services.

After the bubble burst, Docomo retreated from investments outside Japan and settled into a stable role as the biggest of three cellphone providers that serve most consumers in Japan.

The others are KDDI Corp. and SoftBank Corp. , which is partly owned by SoftBank Group Corp.

In recent years, Docomo came to represent the bulk of NTT’s value, and the logic of separating mobile communications from the rest of the business faded. Both the NTT parent and the Docomo subsidiary had market values of about $85 billion on Monday, meaning NTT’s 66% stake in Docomo represented 66% of the parent’s value.

Other parts of the NTT group have significant overseas business, operating data centers and selling communications systems to improve security in cities such as Las Vegas. Revenue outside Japan reached $19.5 billion in the year ended March 2020.

Formerly a Japanese government-owned telephone monopoly, NTT was privatized in the 1980s, but the government still owns nearly one-third of its shares.

New Prime Minister Yoshihide Suga has taken aim at what he says are excessively high cellphone bills in Japan, hurting the share prices of Docomo and the other two mobile service providers.

French conglomerate says damage to U.S. jeweler’s business invalidates $16 billion deal

LVMH Moët Hennessy Louis Vuitton SE sued Tiffany TIF 0.91% & Co over their soured merger deal, saying the U.S. jeweler’s business has been so deeply damaged during the pandemic that their takeover agreement is invalidated.

The lawsuit, filed Monday in Delaware Chancery Court, counters a lawsuit that Tiffany filed this month against LVMH after the French conglomerate—owner of Louis Vuitton, Dior and dozens of other luxury brands—said it was backing out of its $16 billion acquisition of the jeweler.

LVMH’s lawsuit says Tiffany has suffered a material adverse change to its business, triggering a standard provision in merger agreements that allows the buyer to walk away. Tiffany has been mismanaged during the pandemic and is particularly vulnerable to the disruption the industry is likely to suffer in the years to come, LVMH says.

The complaint says Tiffany’s dependence on the U.S. market and foot traffic in malls means the jeweler’s prospects are particularly grim compared with the broader luxury industry, which has been thrown into turmoil by the pandemic.

To escape from a merger contract, acquiring companies face the burden of showing that a target company’s performance has been unusually bad relative to others in its industry, legal experts say.

“The pandemic’s disruption to the luxury industry and to Tiffany in particular will persist well into 2021 at a bare minimum,” LVMH’s complaint says. “Tiffany is particularly ill-suited for the challenges ahead.”

Tiffany “is a mismanaged business that over the first half of 2020 hemorrhaged cash for the first time in a quarter century, with no end to its problems in sight,” according to the complaint.

Tiffany declined to comment.

The complaint repeats the claim that LVMH is legally barred from completing the deal because of a letter sent by the French foreign minister, Jean-Yves Le Drian, that said LVMH “should” delay the acquisition of Tiffany to early January, more than a month after the deadline for closing the deal.

“‘Should’ is a translation of ‘il conviendrait,’ used in the original letter in French, which is understood to have a (polite) mandatory meaning under French law,” LVMH said.

Before Mr. Le Drian sent his letter, LVMH representatives asked the French finance minister for help in backing out of its agreement to take over Tiffany, and was turned down, according to senior French officials.

Mr. Le Drian last week said he was responding to a request from LVMH for political advice when he wrote the letter to the luxury conglomerate.

Company says problems included some users of its Outlook email services

Microsoft on Monday suffered disruptions with its Office 365 workplace software tools and its Azure cloud that disabled some users for hours.

Microsoft said problems included some users of its Outlook email services and Teams workplace collaboration suite that provides chat functionality and videoconferencing and has seen rapid growth during the pandemic. Users trying to log into the systems were unable to connect, though those already logged in weren’t affected, the company said on its website.

The company initially said it had identified the Office 365 problem it linked to a recent change to the software, and restored an earlier version. That fix, however, failed to restore normal service, the Redmond, Wash.-based company said. About two hours later the company said it was seeing improvements after putting in place mitigation steps.

Service outages like this aren’t unusual. Software providers sometimes encounter glitches when they roll out new versions that can take hours or longer to fix. Alphabet Inc.’s Google last week suffered a disruption with some of its tools, including email and cloud-based word processing.

Users of Microsoft’s Azure, the company’s massive cloud-computing system that many businesses rely on to store and analyze data, on Monday suffered similar problems as those affecting the Office 365 suite.

“We’re working to resolve a service interruption impacting a subset of customers performing authentication operations,” a company spokesman said.

Microsoft said the problems with Azure began around 5:25 p.m. ET. It affected both its so called public cloud and government cloud customers. About four hours later the software giant said users should be seeing services recover.

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