LVMH Moët Hennessy-Louis Vuitton SE was scheduled to acquire Tiffany & Co. no later than August 24th, 2020, but the merger came to a halt when LVMH failed to even apply for antitrust clearance.
Antitrust laws exist to avoid monopolies. If two major companies merge to form one company, there’s a fear that the existence of a huge corporation, which now owns the market shares of both companies involved, might dominate the industry, thereby making it difficult, or even impossible for any other company to compete with them. Since healthy competition promotes innovation and helps drive down prices, it’s necessary for a healthy economy.
As a result, when two major corporations merge to form one company, they have to file for antitrust clearance with the authorities in the markets in which they operate, meaning the authorities look at the market share of the two companies and agree that the merger would not create a monopoly. But according to a recent lawsuit filed by Tiffany, LVMH has not only failed to acquire the antitrust clearance by the agreed-upon date but has failed to even file for antitrust clearance.
The terms of the merger allowed for an extension to November 24th, 2020 if antitrust clearance had not been obtained by August 24th, but the fact that LVMH still has yet to even file for antitrust clearance in two of the three relevant markets raises doubts about whether they’re taking this merger seriously. Tiffany has responded by filing a lawsuit in the Court of Chancery of the State of Delaware.
The lawsuit is asking the court to provide an order that LVMH must abide by the terms of the acquisition, which had been agreed upon by both companies.
Even before the lawsuit was filed the acquisition had been having problems. LVMH had claimed that Tiffany had suffered a Material Adverse Effect (MAE) as a result of the COVID-19 pandemic, and had tried to buy shares of Tiffany at a lower price per share than the price they had agreed upon in the terms of the contract. Continue reading ›