A legal battle has broken out between two of the world’s biggest luxury goods groups after LVMH ditched its planned $16.2bn (£12.5bn) takeover of the New York jeweller Tiffany. Bernard Arnault’s luxury goods empire, which owns brands such as Louis Vuitton, Dior and Moët & Chandon, said it could not go ahead with the the acquisition because it had been undermined by a “succession of events”. These include an intervention this month by the French government, which had asked for a delay to the deal until 6 January in the wake of a threat by the US government to impose import taxes on French products. LVMH, the world’s largest luxury goods group, said Tiffany had also asked that the deal be completed by 31 December instead of 24 November as planned. It said that as the new date was later than that in the merger agreement it “will therefore not be able to complete the acquisition of Tiffany & Co”. In return, Tiffany said it had launched a lawsuit in the US in an attempt to force LVMH to go ahead with the deal “on agreed terms” by the end of November. It said LVMH had failed to meet its promise to secure regulatory clearance for the deal in Europe or Taiwan. It also refuted LVMH’s suggestions that Tiffany had breached its obligations under the merger agreement or undergone a “material adverse effect”, relating to the US social justice protests and the Covid-19 pandemic, which would entitle the French company to pull out of the deal or reduce the terms. Tiffany said the lawsuit also challenged the suggestion that the “transaction is in some way inconsistent with its patriotic duties as a French corporation.”. It said LVMH had assumed all regulatory risk and all “financial risk related to adverse industry trends or economic conditions” under the terms of the deal. Roger N Farah, the Tiffany chairman, said: “We regret having to take this action but LVMH has left us no choice but to commence litigation to protect our company and our shareholders. “Tiffany is confident it has complied with all of its obligations under the merger agreement and is committed to completing the transaction on the terms agreed to last year. Tiffany expects the same of LVMH.” He said LVMH’s unilateral discussions with the French government without consulting with Tiffany were a further breach of the agreement and accused LVMH of puffing up France’s battle over potential US tariffs as an excuse to pull out of the deal. The US has threatened to impose tariffs on French goods if Emmanuel Macron pushes ahead with a proposed tax on major tech companies including Google, Amazon and Facebook. “This supposed official French effort to retaliate against the US for proposed new tariffs has never been announced or discussed publicly; how could it possibly then be an effort to pressure the US into revoking the tariffs? Furthermore, as we are not aware of any other French company receiving such a request, it is all the more clear that LVMH has unclean hands,” he said. When it announced the deal in November 2019 LVMH said the move would transform its watches and jewellery division, which includes Bulgari, Tag Heuer and Hublot, and boost its presence in the US. Founded in 1837 when Charles Lewis Tiffany opened the first store in downtown Manhattan, New York, the US jeweller now has more than 300 stores worldwide and employs more than 14,000 people. Since November, luxury businesses have come under pressure from the economic impact of the Covid-19 pandemic as well as a fall in domestic and tourist spending globally as countries entered lockdown and travel was restricted. However, Tiffany’s chief executive, Alessandro Bogliolo, a former LVMH executive, said the jeweller had already returned to profitability after one quarter of losses and expected profits for the fourth quarter of 2020 to be up on the same period last year. “The fundamental strength of Tiffany’s business is clear,” he said. • The headline of this article was amended on 9 September 2020, as it originally said the sum involved was $16m, rather than the correct figure of $16bn.