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LVMH, the owner of Louis Vuitton, is scrapping its $ 16.2 billion acquisition of Tiffany, a deal that would be the largest ever in the luxury industry.
The luxury-goods giant said on Wednesday The merger agreement, signed last November, provides for a deadline to expire after November 20, 2020. But Tiffany had requested to extend the date to 31 December, and the French Minister for Foreign Affairs instructed the company to postpone the deal. January 6 because of the US threat of taxes on American goods.
The company said in a statement that it would not be able to complete the acquisition of Tiffany “as it stands.” It said that additional time was needed to ascertain any impact from potential US tariffs on French goods, and therefore it could not close the deal before the end of the year.
Tiffany’s shares rolled up 10% in early Wednesday trading. Tiffany’s shares, which have a market value of $ 14.8 billion, have fallen nearly 9% this year.
A Tiffany representative did not respond to a CNBC request for comment. The Wall Street Journal reported that the American jewelry chain has filed a lawsuit in Delaware to enforce the agreement, stating that the French government’s request has no basis in law.
The coronovirus epidemic has hit the luxury retail sector hard, bringing Tiffany’s same-store sales down 44% and putting the LVMH deal in doubt. Investors worried that French company Overpaid, and LVMH CEO Bernard Arnault were lowering the price of buying American jewelry chains, according to people familiar with the case.
Amid the turmoil, LVMH and Tiffany had agreed to roll back an early deadline from August 24 to November 24, as negotiations began to soured.
Analysts said they believed the transaction was still ongoing, but at a lower cost.
The trade of Tiffany and other luxury retailers that seemed to stop with international tourism has declined, as many people shop for handbags and diamonds at their major stores in the US, relying on large expenses from China. In buying Tiffany, LVMH was looking to grow its jewelry business, one of the hottest and fastest growing categories in the epidemic.
At the time of Tiffany’s earnings report in early June, the company was still waiting for the deal to overcome significant regulatory hurdles.
Some other retail-related deals have been closed due to the epidemic.
Simon Property Group, the owner of the largest US mall, has concluded its deal to buy the high-end mall owner Tubman, prompting Tauman to file a counter-notification against Simon’s allegations. Private-equity firm Secamor also backed its deal to take over Victoria’s Secret from L Brands.