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Photo: Cindy Ord/Getty Images

LVMH yesterday broke off its $16.2 billion engagement to Tiffany & Co., and then the two sides sprinted to file competing lawsuits in Delaware.

What we learned: The French government may have played a key role in the split, asking LVMH to delay the deal close for two months past the agreed-upon deadline.

Details: The request came via an August 31 letter from France's foreign affairs minister, who is the equivalent to the U.S. secretary of state. According to an English translation disclosed by Tiffany, it reads in part...

"The American government has decided to implement an additional customs duty on the import of certain French goods, in particular goods in the luxury sector, in reaction to France adopting a digital services tax, with the U.S. deferring the application thereof until January 6, 2021.
France considers these measures legally objectionable. ... Because the implementation of these tariffs may affect France’s external relations ... proposed investments by French companies in sectors that could be subject to such sanctions must be reevaluated in light of this new context.
You should defer the closing of the pending Tiffany transaction until January 6, 2021. I am sure that you will understand the need to take part in our country’s efforts to defend its national interests."

Basically, LVMH told Tiffany: "I really like you, but my parents hate your parents, so I just don't think it'll work out right now."

Tiffany didn't take the rejection in stride. It seems to believe LVMH is using the French government request as cover for its own cold feet, referencing how LVMH previously tried to negotiate deal terms under the guise of "U.S. social justice protests and the COVID-19 pandemic."

  • It wants Delaware Chancery Court to enforce the deal.
  • It also got some backup via a new Bloomberg report that LVMH chairman Bernard Arnault "asked for help from the French government in an effort to pull out of [the deal]."

LVMH this morning said not only that it will "defend itself vigorously," but also that it will file a lawsuit of its own — claiming Tiffany violated the deal terms through "crisis mismanagement."

  • Specifically, LVMH says it will cite dividend distributions during the pandemic.

The bottom line: Breakups can be messy, particularly when there's a third party involved.

Go deeper

LVMH backs out of Tiffany acquisition over U.S. tariffs

Photo; Smith Collection/Gado/Getty Images

LVMH backed out of an $18.5 billion agreement to buy jeweler Tiffany & Co. Wednesday, citing U.S. tariffs on French products.

The big picture: LVMH’s board of directors recently made the decision after a "succession of events which undermine the acquisition," the company wrote. Tiffany filed a lawsuit in Delaware to enforce the acquisition.

Our thought bubble via Axios' Dan Primack: The move highlights how the U.S. is in trade wars with more than just China, with the Trump administration proposing new tariffs on French luxury goods in retaliation for a French tax on U.S. tech companies.

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