The legal arguments have become pretty well set since LVMH said last month that it planned to walk away from the $16.2 billion acquisition of the brand, but in its latest court filing — a response to LVMH’s countersuit in Delaware Chancery Court — Tiffany starts at the top with Arnault.
“Bernard Arnault, the chairman and chief executive officer of defendant LVMH Moët Hennessy Louis Vuitton… personally signed the merger agreement obligating LVMH to pay $135 per share to acquire Tiffany,” the jeweler said in the court filing late Tuesday afternoon. “When the deal was announced, Mr. Arnault called Tiffany a ‘jewel’ and said that he looked forward ‘to ensuring that Tiffany continues to thrive for centuries to come.’
“But Mr. Arnault did not amass a personal fortune estimated at $77 billion, if not more, and earn a reputation for a ‘ruthless approach to acquisitions’ without a willingness to use every means and opportunity at his disposal to ensure that LVMH pays the lowest possible price for the assets he desires,” Tiffany said.
A spokesman for LVMH said, “We look forward to the opportunity to lay out the facts in the trial early next year and are confident we will prevail.”
Tiffany argues that once the pandemic hit, LVMH “pivoted to a new corporate strategy regarding its acquisition of Tiffany” to “explore every available avenue to evade LVMH’s contractual obligations and attempt to pressure Tiffany to agree to a price cut.”
The jeweler also pointed to reports that LVMH “went so far as to use Mr. Arnault’s vast political influence in France as that country’s wealthiest individual to solicit and enlist the French government’s assistance in LVMH’s efforts to escape its contractual obligations and secure a price cut.”
When LVMH moved to drop the deal, it pointed first to a letter from the French government that, it has argued, required it to defer the deal in light of a trade spat with the administration of President Donald Trump.
That justification later seemed to be deemphasized as LVMH turned to other points, suggesting Tiffany was mismanaged during the pandemic, that the firm unreasonably paid dividends to its shareholders even as its business suffered and that its performance triggered a key clause in the contract that scuttles the deal.
Tiffany noted how the request from the French government receded from the limelight.
“If LVMH had any confidence in this argument [regarding the French government’s request], it would not have relegated it to the back end of its counterclaim (pages 69-79),” Tiffany noted. “LVMH’s apparent lack of confidence in this argument is understandable — it is meritless.”
While much of the case falls along familiar legal lines, the request from the French government offers a little something more, including political intrigue, a letter only LVMH has seen in its original French and suggestions of influence.
“On Sept. 8, 2020, LVMH’s [managing director] Antonio Belloni simply told Tiffany’s [chairman] Roger Farah that LVMH cannot give Tiffany the original letter because ‘it is confidential,’” Tiffany said. “LVMH also failed to provide the European Commission case team responsible for reviewing the transaction with a copy of the original letter in response to a direct request from the case team. Likewise, LVMH elected not to provide this court with a copy of the ‘Legal Restraint’ on which LVMH rests its claim. In each of these instances, LVMH has been willing to part with only its own English translation of the letter. LVMH apparently believes that it can be relieved of its contractual obligation to close a $16.2 billion transaction based on a mysterious letter that it can maintain in secrecy. That is not how the courts in this country work.”
The legal filing notes that French Foreign Minister Jean-Yves Le Drian was quoted as saying that with the letter, “I answered a question from the LVMH Group.”
Tiffany noted, “LVMH’s solicitation of a letter from the French government to be employed as a means to walk away from LVMH’s contractual obligations was a flagrant breach of the merger agreement. So, too, were Bernard Arnault’s admitted meeting with the French foreign minister to discuss the letter without advising Tiffany beforehand and LVMH’s admitted failure to lift a finger to seek the retraction of the French foreign minister’s request.”
The letter is just one of many points that are likely to be pored over in court.
If that trial does go ahead as scheduled in early January, expect more fireworks considering how intense the back-and-forth has already been so far.
LVMH argued in its suit last month: “Tiffany’s management and board make these baseless allegations to try to resurrect the transaction: they all stand to profit far more if it proceeds than if Tiffany goes forward as a stand-alone company in its wounded state. Tiffany’s ceo, Alessandro Bogliolo, alone stands to receive a change of control payout in excess of $44 million. His golden parachute is equivalent to Tiffany’s losses in the first half of 2020. Tiffany’s top five executives are in line to receive approximately $100 million collectively. On a stand-alone basis, Tiffany’s executives would never earn compensation like this and now, going forward, will instead have to face harsh realities and the shell of Tiffany’s former business.”