On Wednesday morning, news filtered through that French luxury-goods chain LVMH are pulling out of the $16 billion merger agreement with Tiffany (TIF), citing a “succession of events” as the reason for the pullout. Among them, the rise of French tariffs on U.S. imports and Tiffany’s request to complete the deal by December 31 instead of the original November 24 date.
In retaliation, Tiffany have filed a lawsuit against LVMH, alleging the whole move is a ploy to force a renegotiation of the terms dictated back in November 2019, before the pandemic’s onset.
Guggenheim analyst Robert Drbul seems to agree with Tiffany’s claim. The analyst notes the “pandemic has had an outsized impact on TIF’s tourism component and real estate exposure in urban areas.” Drbul expects LVMH to be back at the negotiating table shortly, albeit with a new proposal.
“Considering the deal was initially negotiated in November 2019 (pre-pandemic), we think the deal could still be finalized, albeit at a lower price… While we are surprised to see LVMH appearing to step away from the negotiating table at present, we continue to believe the two parties remain a strong fit for one another and that a likelihood of a (re-)connection is quite likely. We continue to believe LVMH is the optimal buyer for TIF, and TIF is a logical fit within LVMH’s portfolio of brands. Timing and price remain uncertainties.”
The current lack of clarity results in a Neutral rating from Drbul, who has no price target in mind. (To watch Drbul’s track record, click here)
Over the last 3 months, 3 other analysts have posted a review of the specialty retailer’s prospects, suggesting a Hold. Meanwhile, the $127.50 average price target implies a 12% premium from current levels. (See TIF stock analysis forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The post Tiffany: LVMH Calls off the Engagement, but Don’t Discard the Ring Just Yet appeared first on TipRanks Financial Blog.