September 11, 2020 | Consumer Discretionary | North America | Ended
In our 9-Jun-20 in-depth report, we argued that Tiffany / LVMH was far from a done deal and warned that LVMH CEO Bernard Arnault would continue to seek ways to renegotiate the offer terms in order to avoid overpaying, including scrutinising Tiffany’s response to COVID-19. Recent actions from LVMH confirmed our bearish thesis with the companies now suing each other in Delaware. Justifying its right to walk away from the deal, LVMH has pulled nearly every lever we identified, including invoking a material adverse effect, citing the failure to achieve a closing condition, and accusing Tiffany of breaching a covenant. In this report, we explain how developments from both sides have altered the course of the transaction. We discuss the impact of the French government’s involvement, the Tiffany Playbook (specific performance, damages), the LVMH Playbook (limiting liabilities, repricing), and a realistic Tiffany standalone price. We provide our latest recommendation after assigning weighted probabilities to various outcomes, including a reprice, a court ruling, or LVMH confirming another unexpected twist.
Contents 1. Recent Developments and Our Latest Views 2. Implications of Arnault’s Latest Catalyst: the French Government 3. Tiffany Playbook: Specific Performance and Damages 4. LVMH Playbook: Cite All Breaches, Limit Liabilities, Reprice 5. Tiffany Break Price Analysis Appendices A. Letter from French Government, LVMH Release B. Uncertainty from COVID-19 and Acquirers’ Termination Options (41 pages)
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