Paris, France and New York, NY—The biggest luxury marriage of the year has been called off. LVMH, the French luxury goods conglomerate that had planned to buy Tiffany for $16 billion, is bailing on the deal, surprising stock analysts who believed LVMH would take a long-term view of the brand’s value when rumors of trouble started in June.
Tiffany shares fell 9% on Wednesday’s news.
The split is not likely to be amicable. Reuters reports Tiffany plans to file a lawsuit against LVMH and force it to complete the deal as agreed. It accuses the French group of deliberately stalling its completion. The deal was originally slated to close August 24 but was pushed back by three months. LVMH says the French government also asked to push the deal back further, into January 2021, in response to U.S. plans to impose 25% tariffs on French goods including luxury items, a tit-for-tat response to France’s digital services tax, which the United States claims unfairly targets American firms.
It would have been the biggest ever acquisition in the luxury industry. But the deal was made before the pandemic struck, and now the sector is reeling. Luxury sales are expected to fall as much as 35% this year, and Tiffany has been impacted as much as everyone else. Its sales fell 29% in the three months leading up to July, although it flagged a recovery in August. LVMH’s own watches and jewelry division, meanwhile was its worst-performing in the first half of the year, reports Reuters.
Separately, Dallas, TX-based Neiman Marcus has received court approval for its plans to reorganize under Chapter 11. Retail Dive reports the court-approved plan would eliminate $4 billion in debt and $200 million in interest expense. The retailer expects to emerge from the court process by the end of the month. Support by a cross section of Neiman’s creditors signals that they see an entity worth keeping around, says Retail Dive, pointing out that the debt is a legacy of multiple private equity buyouts.
Other retailers—such as Pier One, Lord & Taylor, and Stein Mart—have not been so fortunate in their quests to survive. All three either have liquidated or are in the process of liquidation. Retail Dive says JC Penney, also in Chapter 11, expects to be taken over by lenders but details have yet to be settled or approved.
Neiman’s bankruptcy has not been without its own drama. Last week hedge fund magnate Dan Kamensky, founder of Marble Ridge Capital, was arrested and charged with fraud, extortion, and obstruction of justice. CNN reports that according to the Justice Department, Kamensky sought to suppress a rival bid for MyTheresa, an e-commerce operation that Neiman Marcus acquired in 2014, then he attempted to coerce the rival bidder to cover up the alleged scheme.