By Dominique Jacquet

The price of Tiffany stock has aligned well with what seems to be the end of the story, namely a buyout of the famous blue box by LVMH for $ 131.5 per share instead of the $ 135 originally planned.

This downward revision follows the start of a legal battle, LVMH citing the French government and business economics changes, Tiffany arguing that LVMH was not honoring its commitments.

The Delaware court announced the opening of the trial on January 5, 2021, allowing the two parties to resume dialogue, based on the well-known principle “a bad deal is better than etc.” “.

Observers had mentioned the mobilization of the “Material Adverse Effect” (MAE) clause, present in all acquisition contracts (including Tiffany), which allows the buyer to withdraw if the conditions for exercising the activity have been permanently modified. The Delaware court ruled in favor of the buyer in 2018 (Akron vs. Fresenius), because the target’s results had collapsed after the contract was signed. As far as Tiffany is concerned, the issue could possibly arise due to the health crisis.

No trial, then, and a deal that saves LVMH $ 430 million.

However, if you refer to the evaluation process contained in the June pedagogical film, you will find that $ 131.5 is still a steep price.

I took the Tiffany accounts for fiscal year 2019 and used the financial metrics used by LVMH to assess its intangible assets in the jewelry sector (source: annual report). Out of optimism, I even increased the EBITDA to sales ratio to 25% (from just over 22% in 2019) assuming the implementation of synergies.

A discounted cash flow calculation led to a value of between $ 90 and $ 120 per share… It remains, therefore, for LVMH to implement the integration of this historic brand and to make it a real “Maison” within the meaning of the company, like Dior or Givenchy, while creating value for its shareholders!