LVMH Agrees To Buy Tiffany At Lower Price; Street Sticks To Hold

LVMH agreed to acquire Tiffany & Co at a lower price, putting an end to the battle between the two luxury goods giants over the impact of the coronavirus pandemic.

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Louis Vuitton owner LVMH will buy Tiffany (TIF) for a purchase price of $131.50 per share down, from the $135 proposed originally, the two companies said in a statement. The revised price takes the total transaction value to about $15.8 billion. Other key terms of the merger agreement remain intact, they said. Tiffany and LVMH have also agreed to settle their pending litigation in the Delaware Chancery Court.

“This balanced agreement with Tiffany’s Board allows LVMH to work on the Tiffany acquisition with confidence and resume discussions with Tiffany’s management on the integration details,” LVMH CEO Bernard Arnault commented. “We are as convinced as ever of the formidable potential of the Tiffany brand and believe that LVMH is the right home for Tiffany and its employees during this exciting next chapter.”

The proposed deal, which was announced last November, turned sour when LVMH last month said that it could not proceed with the takeover due to Tiffany’s weakening business and the French government’s request to postpone the acquisition until Jan. 6, 2021 to assess the impact of potential US tariffs on French goods. Tiffany then filed a lawsuit against the Louis Vuitton owner in a court in Delaware to enforce the merger agreement.

The Boards of Directors of LVMH and Tiffany have now approved the revised terms of the transaction and all required regulatory approvals have been obtained, the companies said. According to the modified merger agreement, Tiffany will pay its regularly scheduled quarterly dividend of $0.58 per share as planned on Nov. 19. The merger is expected to close in early 2021, subject to Tiffany shareholder approval and customary closing conditions.

Shares in Tiffany have gained almost 7% over the past 5 days and are now down a mere 2.2% since the start of the year. Looking ahead, the $126 average analyst price target indicates 3.6% downside potential over the coming year.

Guggenheim analyst Robert Drbul has a Hold rating on the stock, saying that he continues to believe LVMH is a logical fit with strategic synergies.

“We think the proposed ~45% premium (down from 50%) is a fair value for the business (~33x our 2021E EPS of $4.00),” Drbul wrote in a note to investors. “We think the pandemic has had an outsized impact on TIF’s tourism component and real estate exposure in urban areas.”

The rest of the Street shares Drbul’s stock outlook with a Hold analyst consensus backed up by 6 unanimous Hold ratings. (See TIF stock analysis on TipRanks)