PARIS — Christian Dior SA is planning a capital increase of $844 million (5 billion francs at current exchange rates) to help pay for the indirect stake in LVMH Moet Hennessy Louis Vuitton it acquired last week from Guinness PLC.
Under the terms of the deal with Guinness, Dior will pay $1.4 billion (8.25 billion francs) for Guinness’s 38.25 percent stake in Jacques Rober, the holding that controls 45 percent of LVMH, necessitating the capital increase.
Dior, primarily a holding company that controls LVMH as well as owns the Dior fashion house, plans to go to the market before the end of February.
On Thursday, Bernard Arnault, president of Dior and LVMH, addressed 60 Paris analysts to reassure them about his group’s plans in the wake of the Guinness deal.
Due in part to the lack of communication by LVMH last week on the Guinness operation, stocks in the Arnault group fell sharply after the announcement. LVMH fell 3.4 percent and Dior dropped 7.7 percent on that day.
On the other hand, Guinness — whose chairman, Anthony Greener, answered questions from the press — saw its stock rise sharply on the London market.
Following Arnault’s address to the analysts, LVMH and Dior advanced slightly in heavy trading Thursday.
“Mr. Arnault explained that he’s looking for acquisitions. What he said LVMH needs is a company with strong brand names, to which LVMH can bring something,” said Jean-Marie L’Home, analyst with Paris broker BZW Puget Mahe. Arnault spokesmen could not be reached for comment.
“Some analysts were reassured by what Arnault said, but some clearly were not,” said L’Home.
“Even if a lot of people bought LVMH this afternoon, plenty of others unloaded the stock. Arnault made a big attempt to impress us today. He even stayed after the meeting to have a drink and answer more questions, something he normally never does. But you couldn’t help thinking that it was largely window dressing,” L’Home added.
He predicted, though, that Dior would not have much difficulty in completing its capital increase. Bon Marche, the Paris Left Bank department store that owns 69 percent of Dior, will subscribe to $253 million (1.5 billion francs) of operation, key institutional investors will take up to $337.5 million (2 billion francs) and the remainder will be offered to the public.
“Dior’s prospects are relatively good. Relative to the value of the stock it indirectly holds in LVMH, it’s undervalued. It should rise,” L’Home said.