Louis Vuitton Owner LVMH is Pulling Out of its Acquisition of Tiffany & Co.

Luxury goods giant LVMH is scrapping its $16.2 billion acquisition of Tiffany & Co., CNBC reported. The acquisition would have been the biggest deal ever in the luxury industry. The merger agreement was signed last November and had a closing deadline of no later than Nov. 20, 2020. However, Tiffany requested an extension until Dec. 31, and due to a U.S. threat of taxes on French goods, the French minister of foreign affairs had directed the company to postpone the deal until after Jan. 6.

CNBC reported that LVMH announced it will not be able to complete the acquisition of Tiffany & Co. “as it stands," and that it needs additional time to figure out any impact from potential U.S. tariffs on French goods. Tiffany & Co. has filed a lawsuit to enforce the agreement, claiming that the request from the French government has no basis in law. 

LVMH was aiming to grow its jewelry business by acquiring Tiffany, since jewelry was one of the fastest-growing categories in luxury until the coronavirus pandemic hit.

Total Retail's Take: The COVID-19 pandemic has hit the retail industry hard, but especially the luxury goods sector. CNBC reported that Tiffany & Co.'s store sales were down 44 percent, which likely contributed to LVMH's worries that it was overpaying for the U.S. jewelry chain. This isn't the only deal that has fallen through over the past few months in part because of the pandemic. For example, Simon Property Group scrapped its deal to buy high-end mall owner Taubman. Also, the private-equity firm Sycamore terminated its deal to take over Victoria’s Secret from L Brands. With uncertainty surrounding the future of brick-and-mortar retail, expect M&A activity to be on the quieter side for the near future.