LVMH's Abandonment of Tiffany Acquisition Spreads into a Battle of Truths

Conflict Over Digital Tax Between France and US IT Companies
LVMH Interpreted as Exit Strategy Under Pretext of 'Trade War'

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The acquisition battle for Tiffany & Co. by Louis Vuitton Mo?t Hennessy (LVMH), considered the largest 'mega deal' in the luxury industry, is escalating into a dispute over the truth. The French government requested LVMH to postpone the Tiffany acquisition due to the 'digital tax' imposed on American IT giants, and there is an interpretation that LVMH, facing a direct hit from the COVID-19 pandemic on the luxury sector, devised an exit strategy under the pretext of a 'trade war.'

According to the Wall Street Journal (WSJ) on the 9th (local time), LVMH announced that it would halt the $16.6 billion (approximately 19 trillion KRW) Tiffany acquisition process in accordance with the French government's wishes. In a statement, LVMH said, "We have been ordered by the French government to postpone the Tiffany acquisition until after January 6 next year," adding, "At this time, we cannot complete the acquisition." This delay is more than a month beyond the original negotiation deadline of November 24.

French Foreign Minister Jean-Yves Le Drian explained in a letter to LVMH, "The delay in the closing deadline is necessary to assess the impact of the Trump administration's threat of high tariffs on French products," and expressed confidence that LVMH would "join efforts to defend France's national interests." WSJ analyzed that the letter sent by the French government to LVMH directly referenced President Trump's moves to impose tariffs on certain French industries, including luxury goods, in retaliation against France's introduction of the digital tax.

However, while the French government confirmed sending such a letter, it clarified that it was not mandatory. Bloomberg cited sources reporting that Bernard Arnault, chairman of LVMH, asked the French government to help him exit the acquisition battle. Although LVMH had agreed to acquire Tiffany before the COVID-19 crisis, the ongoing downturn in the luxury industry afterward led them to seek assistance through the French government to cancel the acquisition. LVMH denied these claims.

Tiffany also claimed that LVMH was using the French government as an exit strategy to withdraw from the acquisition battle. Tiffany threatened to file a lawsuit in Delaware court, stating, "The French Foreign Ministry's request has no legal basis."

Roger Farah, chairman of Tiffany, criticized, "We believe LVMH will use every possible means to avoid completing the deal under the agreed terms."

The truth dispute between the two companies has complicated the tariff war calculations between France and the United States. As a countermeasure against France's digital tax, the U.S. plans to impose a 25% retaliatory tariff on $1.3 billion worth of French products, including cosmetics and handbags, through the U.S. Trade Representative (USTR) on January 6 next year. The French government has requested LVMH to postpone the acquisition until that date.

This content was produced with the assistance of AI translation services.