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Can LVMH Get Out of Its Deal to Buy Tiffany?

We are holding a DealBook Debrief call today as part of The Times’s special project for the 50th anniversary of a seminal Milton Friedman essay that changed the course of capitalism. R.S.V.P. here for the call at 11 a.m. Eastern and see below for more details about our special guests.

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LVMH declared yesterday that its $16.2 billion takeover of Tiffany was effectively dead, citing a highly unusual request by the French government to delay the closing of the deal. Not surprisingly, Tiffany has sued to force completion, dismissing LVMH’s “baseless, opportunistic attempts to use the U.S. social justice protests and the Covid-19 pandemic to avoid paying the agreed price.” The fight over the deal, agreed to nine months ago, is full of drama, M. & A. machinations and political intrigue.

BREAKING — LVMH’s latest maneuver: The company plans to bolster its case by claiming that Tiffany has been mismanaged, violating the terms of the deal, in a countersuit expected within days. LVMH also plans to file for E.U. regulatory approval, which the conglomerate believes undermines Tiffany’s argument that it is slow-walking the deal process.

A key factor in the fight is a French government letter to LVMH. The foreign ministry asked the company not to close the deal until January — well after the transaction’s late November deadline — as France looks to “dissuade the American authorities” from imposing threatened tariffs on luxury French goods. LVMH sent Tiffany a translated copy of the letter, but hasn’t released the French text. (A representative of Tiffany has reviewed the original letter, according to a source.)

Language — and intent — matter here. Under the merger agreement, LVMH is not required to close the deal if there is an “order” from the French government. Whether the letter meets that standard is under debate — and litigation.

• Bloomberg reported that Bernard Arnault, LVMH’s chairman, sought help from the French government in pulling out of the deal. When asked by a reporter whether LVMH requested such help, its C.F.O., Jean Jacques Guiony, said: “You must be joking. Are you seriously suggesting that we procured the letter? I don’t even want to answer that question.” He later said that the letter had arrived unsolicited.

Whether France really wants to intervene is another matter. It wouldn’t have been the first time — France effectively blocked G.E.’s takeover of Alstom’s train unit, and once deemed Danone yogurt a product of “national importance” after rumors of a bid from Pepsi — but it’s unclear whether Paris has the appetite to use the Tiffany deal as part of its trade fight with the U.S. That said, Reuters, citing a French government source, reported that the letter was meant merely as “advice,” not an order.

This may get resolved in court. Tiffany’s shares closed down 6 percent yesterday, but their value remains well above pre-deal levels, suggesting that investors expect the deal to end up renegotiated rather than scrapped. Advisers to the American jeweler argue that their lawsuit, filed in Delaware, is strong: They had been preparing for a possible walkout for months. And LVMH has plenty of U.S. assets that they could pursue for damages, they say.

If the deal dies, what’s Tiffany’s plan B? The pandemic has hit tourism, a key driver of luxury retail, and that comes on top of a long-term decline in marriage rates, which has dampened demand for rings. Despite these challenges, Tiffany renegotiated its debt covenants this summer and beat analysts’ earnings expectations in its latest quarter.

• If the deal goes down, it would be the second-largest to fail this year, behind Xerox’s aborted $35 billion bid for HP and ahead of the $12.7 billion takeover attempt of Qiagen by Thermo Fisher.


Today’s DealBook Briefing was written by Andrew Ross Sorkin in Connecticut, Lauren Hirsch in New York, and Michael J. de la Merced and Jason Karaian in London.


President Trump privately said the coronavirus was “deadly stuff,” even as he downplayed it in public. He told Bob Woodward of The Washington Post in taped conversations that he knew Covid-19 was airborne and deadlier than the flu. He said he deliberately minimized the danger in public: “I still like playing it down, because I don’t want to create a panic.”

The European Central Bank is struggling to tame the surging euro. With the currency up 10 percent against the dollar since March, policymakers are scrambling to ease the burden on European exporters. Expect plenty of questions on the topic for Christine Lagarde, the E.C.B.’s president, at a news conference following its policy-setting meeting in Frankfurt today.

Franchise workers scored a win over a federal rule shielding corporations from lawsuits. A judge struck down portions of a Trump administration rule that made it difficult for workers to sue the parent company of a franchise. In his decision, Judge Gregory Woods of the Federal District Court in Manhattan said that the new rule was “flawed in just about every respect.”

Fewer teenagers are using e-cigarettes, according to the C.D.C. A new survey found that the number of high-schoolers regularly vaping had fallen, after a big rise in recent years. But “youth e-cigarette use remains an epidemic,” said the C.D.C.’s director, Robert Redfield.

New York City restaurants can resume indoor dining, with restrictions. Gov. Andrew Cuomo said yesterday that restaurants can now reopen their interiors at 25 percent capacity, before cooler weather returns. New York had been one of the few cities with a total ban on indoor dining.

We hope that you join us today for a special DealBook Debrief conference call at 11 a.m. Eastern. We’ll discuss the legacy of Milton Friedman’s influential essay, “The Social Responsibility of Business Is to Increase Its Profits,” in the week of the 50th anniversary of its publication. R.S.V.P. here to join.

Can companies serve shareholders and stakeholders equally? This is the heart of the debate around the so-called Friedman Doctrine, which argues for the primacy of shareholders in free-market capitalism. Much has changed over the past 50 years, with more executives aiming to serve a wider set of stakeholders and measure themselves against a broader set of social and environmental goals. Two high-profile proponents of the stakeholder-centric approach will join us on today’s call:

Leo E. Strine Jr., the former chief justice of Delaware, a distinguished fellow at the Columbia and Penn Law Schools, and of counsel at Wachtell, Lipton, Rosen & Katz.

Joey Zwillinger, the co-founder and co-C.E.O. of Allbirds, a footwear company that treats the environment as a key priority.

Bonus material: Mr. Friedman’s essay ran in Apsny NewsMagazine, and this Sunday a special issue of the magazine — in partnership with DealBook — will feature a host of executives, economists, political leaders and others weighing in on its legacy. (There will also be a special Sunday edition of this newsletter.) Among them are Mr. Strine and Mr. Zwillinger, and as a bonus for DealBook readers we’ve published an extended version of their remarks here. A sample:

Mr. Friedman wrote the influential essay at a time when economic security was strong, as the New Deal’s principles produced widespread prosperity, reduced poverty and helped Black Americans take their first real strides toward economic inclusion. Since then, the United States has gone backward in economic equality and security — a situation that the Covid-19 pandemic has exposed for all to see.

Read the rest and then join us for the conference call where you can hear the authors expand on their arguments — and take your questions.

Top government health officials warned that a coronavirus vaccine is unlikely to arrive soon, after the pause in AstraZeneca’s trials because a volunteer developed a potentially related illness. But it’s not all bad news.

The head of the N.I.H. undercut President Trump’s suggestion that a vaccine might be available by Election Day. “To try to predict whether it happens on a particular week before or after a particular date in early November is well beyond anything that any scientist right now could tell you,” Dr. Francis Collins told a Senate panel yesterday.

• Britain’s chief scientific adviser, Sir Patrick Vallance, cautioned yesterday that other potential Covid-19 vaccines may hit similar setbacks. (We noted yesterday why this isn’t necessarily a bad thing.)

But AstraZeneca could restart its clinical trials as soon as next week depending on an investigation into the volunteer’s illness, The Financial Times reported. In other vaccine developments, Pfizer and BioNTech agreed to sell 200 million doses of their treatment to the E.U., with an option for an additional 100 million.

Digital Currency Group announced yesterday that it’s acquiring the Bitcoin and digital asset exchange company Luno, in which it has been an investor since 2014. DealBook spoke with the founders to get some insight on the deal and broader crypto world.

The deal: DCG, a prolific investor in blockchain companies, was founded by Barry Silbert, an early Bitcoin investor. Backers of the New York-based business have included Bain Capital Ventures, Mastercard and Chamath Palihapitiya’s Social Capital. It expects the deal with London-based Luno to help it expand in Africa, Asia and Europe. The two did not disclose a valuation, but Luno’s co-founder, Marcus Swanepoel, said that “all the investors walked away happy.”

What’s the latest in crypto? Cryptocurrency has generally benefited from economic and political uncertainty; the price of Bitcoin has risen more than 40 percent this year. (Mr. Silbert likens it to the younger generation’s version of gold.) In corporate developments, the crypto exchange Coinbase is reportedly laying the groundwork for an I.P.O. and ICE, the NYSE’s parent company, has pushed into the market via its Bakkt division.

• Regulation remains one of the biggest challenges for the industry, and rising geopolitical tensions have added a layer of complexity for deal makers. But Mr. Swanepoel says that DCG’s decentralized approach to governance — popular in an industry that embraces a distributed approach to just about everything — makes it less vulnerable to diplomatic tussles.

What’s next for DCG? Luno is in the market for acquisitions, but Mr. Silbert said that he didn’t expect DCG itself to announce any major purchases. Would it ever consider going public? Mr. Silbert said there was “nothing to share” there. Still, he said, “one of the benefits of being a company, as opposed to being a fund, is that we have that option.”

Trust us and check out an eye-opening new interactive feature by The Times. This is how the team of reporters and editors who assembled it introduce the project:

The most powerful people in the United States pass our laws, control Hollywood’s studios and head the most prestigious universities. They own pro sports teams and determine who goes to jail and who goes to war.

A review by Apsny Newsof more than 900 officials and executives in prominent positions found that about 20 percent identify as Black, Hispanic, Asian, Native American, multiracial or otherwise a person of color. More than 40 percent of Americans identify with one of those groups.

Even where there have been signs of progress, greater diversity has not always translated to more equal treatment.

Spend some time with it here.


• J.C. Penney, the bankrupt department store chain, agreed to sell its retail business to the mall operators Simon Property Group and Brookfield Property Partners, averting a liquidation. (NYT)

• The operator of the Kansas City Southern railroad reportedly rejected a $20 billion takeover bid by a group including Global Infrastructure Partners and Blackstone as too low. (WSJ)

• The investment bank Perella Weinberg Partners is getting into the frenzy for blank-check companies by launching one with a twist: It will seek to buy a company owned and run by women. (Bloomberg)

Politics and policy

• Joe Biden proposed a 10 percent tax to penalize American companies that move manufacturing and service jobs abroad and a 10 percent tax credit for businesses to create jobs in the U.S. (WaPo)

• JPMorgan Chase has reportedly fired several employees accused of defrauding federal coronavirus aid programs. (FT)

• “Do Jobless Benefits Deter Workers? Some Employers Say Yes. Studies Don’t.” (NYT)


• Ireland’s data-protection regulator has begun investigating whether Facebook’s transfers of data about European users to U.S. servers adequately protect those people from American government surveillance. (NYT)

• Portland became the first U.S. city to ban the use of facial-recognition technology by government agencies or private groups in public spaces. (Business Insider)

Best of the rest

• Governments should pay people to take a coronavirus vaccine, argues the economist Greg Mankiw. (NYT)

• The teams that design new iPhones developed a custom face mask for Apple employees. (Bloomberg)

• “Hot new job title in a pandemic: ‘Head of remote work’” (WaPo)

We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

Apsny News

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