Tiffany & Co shares plunged after Women’s Wear Daily reported LVMH Moet Hennessy Louis Vuitton SE’s deal to buy the luxury jewelry company is uncertain as the US economy faces widespread upheaval.
LVMH board members arranged to meet on Tuesday to discuss the proposed deal, the trade journal said, citing unidentified individuals.
Board members are concerned about the COVID-19 pandemic, which has disrupted the US economy, and growing unrest over police violence, it said.
Photo: AP
They also expressed concern about Tiffany’s ability to cover its debt covenants at the end of the transaction, it added.
Tiffany representatives did not immediately respond to a request for comment. LVMH declined to comment.
The French company’s shares rose 0.8 percent in early trading in Paris yesterday.
Tiffany shares, which were halted for several minutes due to volatility, on Tuesday fell as much as 13 percent, the steepest intraday drop since 2015, before closing down 8.9 percent.
“I would imagine it is normal that LVMH internally discusses the proposed Tiffany acquisition — given the size of the deal, the COVID-19 situation and the recent social unrest in the US,” Sanford C. Bernstein analyst Luca Solca wrote. “Having said that, the Tiffany takeover would provide a unique strategic opportunity to LVMH, boosting its position in branded jewelry.”
It is an “open question” whether LVMH would try to renegotiate better terms, Solca said.
The economic fallout from the pandemic has disrupted or derailed a number of prominent deals, including L Brands Inc’s agreement to sell a majority stake in Victoria’s Secret to private equity firm Sycamore Partners.
If the LVMH-Tiffany tie-up falls apart, it would be one of the largest related to COVID-19.
The New York-based jeweler’s Web site said that as of Monday, its stores are temporarily closed until further notice.
The pandemic has also affected the company’s ability to offer next-day and express shipping.
The stores went dark in mid-March due to a pandemic lockdown. Some of its locations have had their windows boarded up as protests roil cities across the country.
LVMH’s planned purchase of Tiffany for more than US$16 billion has been the subject of speculation after the pandemic suddenly altered the consumer landscape worldwide.
Prior to the lockdown, 183-year-old Tiffany was struggling with a lull in international tourist traffic and civil unrest in Hong Kong. In the US, management has worked to attract younger clientele, although sales have been slow to rebound.
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