Tiffany & Co. (NYSE: TIF) shareholders recently voted overwhelmingly in favor of a $15.8 billion merger deal with French company LVMH after a rocky start to their union.
LVMH presented its acquisition bid to Tiffany towards the end of 2019 but the deal was severely affected by the coronavirus pandemic. The pandemic-induced uncertainties forced the company to opt out of the promise to finalize the deal. The French company also cited heated political climate as one of the reasons for delaying the deal’s completion.
The delayed transaction forced Tiffany to take legal action against LVMH in September last year in an effort to get the French company to honor its end of the deal. Meanwhile, the U.S retailer reported that is sales have been recovering in the past few months in the U.S and China which are its biggest markets. The improving sales are courtesy of demand recovery in the two markets.
LVMH renegotiated its deal and has already received regulatory approval
The French company managed to renegotiate a more favorable deal on account of the challenging situations. It was previously supposed to pay $16.2 billion or $135 per share as part of the merger deal but will instead pay $15.8 billion or $131.5 per share as part of the renegotiated price. The renegotiated deal has already been approved by regulators and by 99 percent of Tiffany’s shareholders. The two companies are expected to finalize the deal early in 2021.
The favorable shareholder votes in favor of the deal were largely thanks to the fact that the renegotiated price was not heavily discounted. They previously feared that the deal would collapse, leaving the company back at square one. Investors are also optimistic about Tiffany’s performance moving forward. The company expects luxury segment sales to continue improving as the industry continues to recover from the COVID-19 fallout.
Tiffany is still underperforming in the jewelry market but that also means there is some growth potential to be tapped into. However, the next few months might still be slow given that the global markets are still in recovery mode.