The announcement comes a day after LVMH announced that it would cancel the $ 16.2 billion acquisition of Tiffany, a deal that would have been the largest in the luxury industry. Tiffany then sued LVMH in Delaware to enforce the agreement.
LVMH said it was “surprised” by Tiffany’s “wholly unfounded” lawsuit.
“LVMH will vigorously defend itself,” said the company. “The length of time in preparation for this assignment shows Tiffany’s dishonesty in its relationship with LVMH. This action is essentially based on Tiffany’s allegation that LVMH did not take the steps reasonably necessary to obtain approvals from various regulatory agencies in a timely manner.”
LVMH has argued that the Tiffany acquisition cannot be completed after the French government requested a delay in closing the deal. It was also said that Tiffany did not conduct its usual normal course of business during the pandemic, such as paying dividends to shareholders when it lost money.
Tiffany’s latest financial results and outlook for 2020 are “very disappointing and significantly inferior to those of comparable brands in the LVMH Group.”
Tiffany net sales for the quarter ended July 31st decreased 29% year over year. That was slightly better than a 45% decline for the quarter ended April 30 and a loss of $ 65 million.
A Tiffany representative did not immediately respond to CNBC’s request for comment.
“Tiffany’s business trends were volatile even before the pandemic, but Covid-19 created challenges the company has never seen before,” Wells Fargo analyst Ike Boruchow said in a statement to customers.
However, he said investors appear to be holding a “floor” on the stock in the short term, betting that initiatives by Tiffany’s management team to expand into new product categories and invest online will pay off even as a stand-alone company. Tiffany is also still in the process of rebuilding its flagship on Fifth Avenue in New York.
And there’s still a chance the deal could be renegotiated by LVMH at a lower price or another conglomerate come into the picture and make an offer for Tiffany, Boruchow said.
Tiffany stock was up nearly 1% on the Thursday before trading, after falling more than 6% on Wednesday. Stocks are down around 14% this year and have a market value of $ 13.8 billion.