Luxury jewelry retailer Tiffany & Co. (TIF: Quote) said it has made a firm offer to buy jewelry designer Elsa Peretti's intellectual property rights, but both parties are yet to reach a deal.
Since 1974, Tiffany has been the sole licensee for these rights necessary to make and sell Peretti-designed products under Peretti's trademarks.
As per a U.S. Securities and Exchange Commission filing made by Tiffany on Wednesday, Peretti has warned that she may terminate the license agreement if both parties fail to agree on terms regarding the deal price.
A termination of the license agreement could adversely affect Tiffany's operating results. As per the filing, the designs of Peretti accounted for 10 percent of Tiffany's net sales in 2009, 2010 and 2011, while Peretti receives a royalty.
Peretti recently had expressed interest to sever her relationship with Tiffany, following which her advisors initiated negotiations for the transaction.
According to Tiffany, the price it has offered is based upon the value of the Peretti Intellectual Property to Tiffany. For the retailer, it represents a "significant" investment that would likely improve cash flows and operating results in subsequent years.
However, if the license agreement is terminated by either party, Tiffany would retain all rights for six months following the date of notice of termination. It will also get an additional year to sell any Peretti-designed products on hand or on order.
In case of termination, the company expects that the potential losses in net sales could be substantially mitigated through the design and merchandising of new products, redeployment of Peretti-related advertising and display resources as well as changes in the promotion, display and merchandising of existing products.
Tiffany shares closed Wednesday's trading at $61.80, up $0.36 or 0.59 percent. In the extended trading, shares rose $1.40 or 2.27 percent to $63.20.
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by RTT Staff Writer
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