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Bloomberg
Tiffany & Co plunged after Women’s Wear Daily (WDD) reported LVMH’s $16 billion deal to buy the jeweler is uncertain as the US economy faces widespread upheaval.
Board members of the French luxury giant arranged to meet to discuss the planned acquisition, WWD reported, citing unidentified individuals.
Directors are concerned about the Covid-19 pandemic that has disrupted the US economy and growing unrest over police violence, the fashion publication said.
They also expressed worries over Tiffany’s ability to cover its debt covenants at the end of the transaction.
Tiffany shares fell 8.9% to $117.03 on June 02, the steepest intraday drop since 2015. LVMH, which has agreed to pay $135 a share for Tiffany, was little changed in Paris trading on Wednesday.
Tiffany’s representatives didn’t immediately respond to a request for comment from Bloomberg. An LVMH representative declined to comment.
“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,†wrote Luca Solca, an analyst at Sanford C Bernstein. “Having said that, the Tiffany takeover would provide a unique strategic opportunity to LVMH, boosting its position in branded jewellery.â€
Solca said it’s an “open question†whether LVMH would try to renegotiate better terms. Tiffany has dropped 12% since the French company agreed to the purchase, the biggest in
the luxury-goods industry, in November. The deal was supposed to close in the middle of this year.
The economic fallout from the pandemic has disrupted or derailed a number of prominent deals, including L Brands’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 so far related to Covid-19.
The New York-based jeweller’s website says that as
of June 1, its stores are temporarily closed until further notice.