By  on October 27, 2010

PARIS — LVMH Moët Hennessy Louis Vuitton told the French market authority it has no intention of taking control of Hermès International or making a public offer in the next six months — but it didn’t rule out buying more shares.

The declaration, filed late Wednesday, also details how LVMH acquired its 17.1 percent share in Hermès via a variety of intermediary companies it controls under the names Sofidiv SAS, Hannibal SA, Altair Holding LLC, Ivelford Business SA, Bratton Services Inc. and Ashbury Finance Inc.

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

The filing said LVMH declared on Oct. 21 that it crossed that threshold with transactions to purchase more than 15 million shares, representing 14.2 percent of Hermès — one of the luxury world’s greatest trophy brands.

Sofidiv acquired almost 10 million shares via equity swaps concluded in the first half of 2008, but with maturity dates in early 2011 and adelivery date for the shares of Oct. 22, the filing said.

Using the same intermediary companies and another equity swap concluded in 2008, LVMH acquired the 3 million derivative instruments it said it has already converted into shares.That declaration was made Oct. 24.

LVMH was also compelled to make a statement of intent, as Hermès requires of any party coming into possession of more than 15 percent of its share capital.

The threshold to file a public takeover bid or offer of exchange stands at 33.3 percent.

In the filing to the market authority, LVMH said it acted alone, financed the share purchases with its own resources and has no intentions of seeking representation on Hermès’ board of directors. LVMH also described its investment as strategic and long term. “LVMH supports the strategic vision, growth and positioning of Hermès International,” the filing said.

The market euphoria around LVMH’s stealth purchase continued to ease Wednesday after causing shares of Hermès to spike 15.1 percent on Monday. Shares in Hermès fell 9 percent Wednesday to close at 162.95 euros, or $226.60 at current exchange rates, on the Paris Bourse, following an 11.8 percent drop on Tuesday.

Shares in LVMH slipped 4 percent on Wednesday to close at 111.95 euros, or $155.68.

LVMH said it bought the Hermès stake at an investment cost of 1.45 billion euros, or $2.02 billion.

That works out to about 80 euros, or $111.61, per Hermès share, putting it at a multiple closer to sector averages and meaning LVMH is already sitting on a huge paper profit.

In the face of an unsolicited offer, family-controlled Hermès has said its members control close to 75 percent of the firm and have a “unanimous will to maintain long-term control of the company.”

But while Hermès has vowed to battle any takeover attempt — and LVMH chairman and chief executive officer Bernard Arnault claims he isn’t interested in making one — few observers expect Arnault, who famously won control of Vuitton and LVMH in the late Eighties by pitting family member against family member and ultimately launching a hostile takeover bid, will be content with a silent minority holding.

More recently, Arnault waged a long and bitter battle for control of Gucci, which was ultimately stymied when, in 1999, François Pinault stepped in as a white knight and launched a tender offer of his own, allowing PPR to position itself as a rival luxury group.

“I believe LVMH is parking itself in pole position for a future acquisition. It’s only possible to extract the synergies if they control the company outright,” Luca Solca, luxury analyst at Bernstein Research in London, told WWD over the weekend. “This suggests a portion of the family wanted to sell.…This could happen relatively quickly or take many years.”

Arnault has long expressed admiration for Hermès — almost as consistently as Hermès management has sought to trumpet the family’s unity and will to remain independent despite interest from eager suitors.

To access this article, click here to subscribe or to log in.

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus