A bling takeover row may end with a face-saving truce. French behemoth LVMH and its target Tiffany are negotiating a price cut on the U.S. jeweler’s pre-pandemic $16 billion price tag, Reuters reported on Tuesday. A deal at around $130 a share, above yesterday’s close around $123, may get Tiffany to the table. It would save French tycoon Bernard Arnault some $600 million – hardly a massive amount. But settling for a discount, albeit small, could offer benefits to both.
For Tiffany, getting a new agreement quickly makes obvious sense. The pandemic has taken some of the sparkle off the New York-based company. Enforcing its merger contract in court, as it’s trying to do, further delays the arduous process, and there’s no guarantee it will be successful. If it pushed through the U.S. court system and failed to force LVMH to close the deal, its shares would tank. Worse, Chief Executive Alessandro Bogliolo would have to battle the fallout of Covid-19 on his own as it continues to ravage its main U.S. market.
For Arnault, obtaining a discount may be a matter of pride more than finance. The tycoon balked at Tiffany’s decision to continue to pay dividends during the virus crisis. Cutting the deal by $5 a share saves him just 4%. But he’s kicked up such a fuss – and already put his own shareholders through the uncertainty by snubbing the original $135-a-share offer – that he needs to save face.
More importantly, with the merger now clear of antitrust hurdles, a quick deal might allow LVMH to own the jeweler before Christmas and the all-important Chinese New Year. If given the chance, best for both companies to start 2021 on the right foot.