WWD.com/business-news/financial/french-market-regulator-probes-lvmh-stake-in-herms-3374103/

PARIS — France’s market regulator AMF will investigate LVMH Moët Hennessy Louis Vuitton’s acquisition of a 17.1 percent stake in Hermès International to determine if rules were respected, an AMF spokeswoman said on Friday.

This story first appeared in the November 8, 2010 issue of WWD.  Subscribe Today.

LVMH filed a statement on Oct. 23 revealing that it had purchased more than 15 million shares, representing 14.2 percent of Hermès, and had options for another 2.9 percent.

In France, companies are required to declare stock purchases when they exceed 5 percent of the share capital.

Luxury mogul Bernard Arnault’s group said it achieved the Hermès stake through several cash-settled equity swaps, in which an investor essentially bets on the future value of a stock without actually owning the underlying shares.

LVMH said Friday that it welcomed the AMF inquiry.

“LVMH is confident that this inquiry will establish, as the group has always affirmed, that these operations were made in full respect of current regulations,” it said.

Officials at Hermès had no comment on the decision.

Though the AMF investigation may take several months, the authority’s president, Jean-Pierre Jouyet, has made clear that he does not consider French law to be stringent enough.

“French market regulations should be at least as severe as that of other European countries, and in this field they are not. Too often, France remains a ‘Wild West’ in terms of taking control of companies and going over thresholds,” Jouyet said Friday on RMC radio.

“Any sort of instrument that allows you to buy shares in another firm must be declared. There should be no exceptions. Therefore, the rules have to be adapted to that effect,” he added.

In comments published this week, Hermès executives called on Arnault to sell his shareholding and said the operation had raised many questions for the AMF to clarify. Arnault replied that he had no intention of getting rid of the stock and that no laws had been broken.