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PARIS — Unexpected windfall, or meticulously planned attempt at a creeping takeover?
This story first appeared in the May 20, 2013 issue of WWD. Subscribe Today.
LVMH Moët Hennessy Louis Vuitton said it will “vigorously” defend itself against the latter characterization of how it came to be the second largest shareholder in Hermès International.
The luxury group issued a statement to that effect Saturday in response to a front-page article in Le Monde which detailed findings of a French market authority, AMF, probe ahead of a May 31 meeting of the AMF’s sanctions committee.
Revealing leaked details of a 115-page report compiled by the AMF, the French newspaper reported that LVMH began building its stake in Hermès as far back as 2001 via subsidiaries in various tax havens, employing the code name “Mercure” for its investment operation.
The company resumed its quiet accumulations — in amounts below mandatory disclosure thresholds for public companies — in 2007 via equity derivatives through financial intermediaries, Le Monde said.
Its article ran under the headline “LVMH’s very secret plan.”
The findings appear to fly in the face of claims by LVMH that it came almost by accident to hold a hefty stake in the famous maker of Birkin bags and silk scarves.
Speaking at LVMH’s annual general meeting here last month, chairman and chief executive officer Bernard Arnault reiterated that his intentions toward Hermès were peaceful and he did not plan to increase his stake in the family-controlled firm.
“You know, we found ourselves owning shares in this company…unexpectedly. We had not planned to be shareholders in this firm. We made a financial investment, and that financial investment had an outcome that we had not expected,” Arnault said at the time.
LVMH surprised markets by revealing in October 2010 that it had amassed a 17.1 percent stake in Hermès via cash-settled equity swaps that allowed it to circumvent the usual regulations requiring firms to declare share purchases. As of Dec. 31 last year, it had raised its stake to 22.6 percent.
On Saturday, LVMH charged that the AMF document was procured in “illicit ways,” whereas it had respected the rules of confidentiality around the AMF’s investigation, launched in November 2010.
Moreover, it noted the sanctions committee would not deliver its decision until after it had examined evidence presented in LVMH’s defense that it respected market rules.
Reached by WWD on Saturday, an Hermès spokeswoman had no comment on Le Monde’s report.
Meanwhile, LVMH and Hermès are duking it out in court over the stake.
Hermès last year launched a criminal complaint against LVMH, accusing the world’s largest luxury conglomerate of insider trading, collusion and manipulating stock prices.
LVMH in turn filed a suit against Hermès for slander, blackmail and unfair competition.
Last month, Hermès ceo Patrick Thomas said he remained “extremely confident” concerning the outcome of the AMF investigation and the criminal complaint.
Last year, Hermès grouped family-owned shares into a nonlisted holding company to gird it against further advances by LVMH.
The Dumas, Puech and Guerrand families collectively own more than 70 percent of the shares in Hermès International, a limited partnership structure that guarantees they keep control of management.
The H51 holding company groups 50.2 percent of the firm’s capital and has priority purchasing rights on the remaining shares held by the family members participating in the initiative — some 12.6 percent of capital.