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LVMH files countersuit against Tiffany over $16B deal

Luxury retailer LVMH filed a countersuit against Tiffany. Yahoo Finance's On The Move panel weigh in.

Video Transcript

ADAM SHAPIRO: We're going to turn our attention to a deal that proves all that glitters is not gold. LVMH has filed suit because it wants to walk away against-- oh away from its $16.6 billion deal to purchase Tiffany. Now, Tiffany, it says, had a big loss in the first half of the year, $45 million, and that its prospects going forward are dismal.

Akiko Fujita, is there going to be a luxury market after the pandemic? I would imagine people will still want all those things that glitter.

AKIKO FUJITA: Yeah, I think there will be a luxury market. The question is how Tiffany survives. And I think-- you know, the comments that we have read today, it does seem to point to the real reason behind why LVMH is trying to pull out of the deal. If you'll recall, earlier this month, when we were talking about that, the reason given was because of concerns about the US tariffs and how that would affect French goods.

Now, you've got LVMH coming out and talking about how poorly they believe Tiffany's has been run, particularly around the pandemic. A number of reasons given, of course, in terms of the timing of the reopening of the Tiffany stores at a time when a lot of stores had not been doing that. Basically, Tiffany's-- or LVMH saying that this is a different business than the one that we were looking or at least agreed to buy, with a $45 million loss in the first half.

I do think it's interesting that one of the concerns LVMH has mentioned is that Tiffany did not mention a pandemic on the list of risks that LVMH would have to bear. Now, you could argue, from the Tiffany's perspective, well, could they have really seen the extent of the losses that this pandemic would have brought on? But it's going to be an interesting fight to watch here because there are a war of words already. And no question, this is going to be a really dragged out process.

JULIE HYMAN: Akiko, it already feels like a dragged out process to some extent, right? And in this, the interesting phrase that LVMH uses in this filing is "material adverse event." They say that that is what coronavirus and this pandemic has been. That's a legal term. And we'll see if the court in Delaware buys it because they have a history of keeping companies or entities of any type to the contracts that we have signed. So we'll see if that succeeds.

Then, of course, there is what you're talking about as well, that LVMH is contending Tiffany has badly handled this, that they paid a dividend, for example, in the first and second quarter instead of suspending it.

And that all then leads to the question, if this deal is forced to go through by the courts, or if the two entities decide to bring it together, culturally, what kind of management they're going to have after this is all said and done. When they have had such a sort of acrimonious battle and war of words, you wonder if it's going to be difficult from a management perspective to move beyond this if the deal eventually gets done.