By and  on May 6, 1994

PARIS -- LVMH's acquisition last week of the majority of Guerlain has earned a thumbs-up from the beauty and luxury goods industries here.

Some are even calling it Bernard Arnault's smartest move since securing control of LVMH three years ago.

In Guerlain, the LVMH chairman has bought a well-run company with a prestigious name and a slew of exclusive products, observers point out. And, according to analysts, the deal was done for a reasonable price.

Under the terms of the deal, unveiled April 29, the Guerlain family will receive the equivalent of $343.5 million worth of Christian Dior stock in exchange for 49.9 percent of Djedi, the holding company that controls 86.8 percent of Guerlain. LVMH already owned the remaining 14.2 percent.

This acquisition values Guerlain at about $770 million (4.4 billion francs), or more than twice its 1993 sales of $351 million (2 billion francs) at current exchange rates.

In the four days of trading this week, since the Guerlain acquisition was announced Friday, the price of Christian Dior stock rose 7 percent, closing Thursday at $77.20 (440 francs).

"I don't think that LVMH paid too high a price," said Jean-Marie L'Home, a luxury goods analyst with Paris broker BZW Puget Mahe. "If you average 1992 and 1993, they paid 23 times earnings, while Elf-Sanofi paid 28 times earnings for Yves Saint Laurent, though admittedly YSL's name has greater renown."

There is plenty of speculation as to why the Guerlain family sold out. Their company has fairly consistently earned a net profit margin of 10 percent on sales and apparently was relatively debt free.

"It was a family decision," said Jean-Pierre Guerlain, head of Djedi, the family's holding company and president of the supervisory board of Guerlain SA. He is also the great-grandson of Pierre Francois Pascal Guerlain, who founded the company in 1828.

"I can't explain the motivation of each and every member of the family, but some of them clearly wanted to sell," Guerlain said. "It was a decision we made jointly. There's no split."

He also rejected rumors that the family felt forced to sell because it didn't have sufficient funds to finance future development.

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