French luxury products firm LVMH Moët Hennessy Louis Vuitton (LVMH) has decided to scrap its previously planned acquisition of luxury jewelry retailer Tiffany & Co. The company announced on Wednesday that it will no longer be able to complete the $16.2 billion acquisition, which it had agreed to back in November of last year.

The merger agreement originally determined a closing deadline for the deal of no later than November 24. Tiffany later requested for the deadline to be extended to December 31. France's Ministry of Foreign Affairs later ordered both companies to move the deadline to January 6, 2021, following new threats from the United States of added tariffs on French-made goods.

In its latest statement, LVMH explained that it can no longer move forward with the deal "as it stands." The Paris-based company explained that the uncertainty involving the potential impact of the added tariffs on French luxury goods prevents it from closing the deal at the currently set deadline.

Following the announcement, Tiffany's share prices dropped by nearly 10 percent in early trading on Wednesday. The stock dropped from a close of $121.82 per share on Tuesday to a low of $108.68 per share on Wednesday. The stock slightly recovered and closed at $113.96 per share. Since the start of the year, the stock has dropped by close to 9 percent.

Tiffany has yet to issue a formal response to the LVMH's decision but reports citing sources close to the matter have revealed that the jeweler has filed a lawsuit in Delaware to enforce the previously signed agreement. The same sources claim that the deadline imposed by the French government has no basis in law and that LVMH should adhere to the terms of agreement.

Like other luxury retailers, Tiffany's business was heavily impacted by the spread of the pandemic earlier in the year. The company previously reported that it same-store sales had dropped by more than 44 percent during the height of the health crisis. Due to its poor performance over the past quarters, investors had raised concerns over the price LVMH was willing to pay for the company.

Sources close to the deal have claimed that LVMH had been actively negotiating to lower the acquisition price given the current circumstances. Negotiations reportedly turned sour, but most analysts still expect the deal to go through, albeit at a much lower price than what was initially agreed upon.