French luxury goods giant LVMH said it would walk away from its planned $16 billion takeover of US jeweller Tiffany, in the most high-profile example of a deal to face collapse following the Covid-19 pandemic.
The stage is now set for an acrimonious dispute.
Tiffany said it was filing a lawsuit against LVMH to force it to complete the deal as agreed last year, accusing the French group of deliberately stalling completion of the takeover.
The deal, which would have been the biggest-ever in the luxury industry, was struck before the pandemic, which has hit the sector hard and raised questions about whether LVMH was overpaying.
LVMH said in a statement that its board had received a letter from the French foreign ministry asking it to delay the acquisition of Tiffany to beyond January 6, 2021 given the threat of additional US tariffs against French products.
The French group added that Tiffany had also asked it to postpone the closing of the deal to December 31 of this year from an already extended deadline of November 24.
The company said its board had decided to stick to the terms of the original merger agreement, which states that the deal must be completed by November 24.
"As it stands, the Group LVMH will therefore not be able to complete the acquisition of Tiffany & Co," it said
Tiffany said it was suing LVMH and seeking a court order requiring the French group to abide by its contractual obligation under the deal to complete the transaction on the agreed terms.
It said LVMH was in breach of its obligations relating to obtaining competition clearance.
It also refuted LVMH's suggestion "that it can avoid completing the acquisition by claiming Tiffany has undergone a material adverse effect or breached its obligations under the Merger Agreement, or that the transaction is in some way inconsistent with its patriotic duties as a French corporation."