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Hermès Wins Key Ruling in Battle With Arnault

Court of Appeal ruled that Hermès can group family-owned shares into a nonlisted holding company by year-end.

By
with contributions from Casey Hall

PARIS — Hermès has won a big victory in its battle with Bernard Arnault.

A French court ruling Thursday gave Hermès International a major boost in its fight to block what appears to be a creeping takeover attempt by Arnault’s LVMH Moët Hennessy Louis Vuitton, saying that Hermès can group family-owned shares into a nonlisted holding company by year-end.

The Court of Appeal rejected an appeal by minority shareholders, who were seeking to overturn a January decision by France’s stock market authority AMF exempting Hermès from rules that would have required it to launch an offer for outstanding shares as part of the operation.

The family members who filed the request to pool their shares, which include Hermès artistic director Pierre-Alexis Dumas, greeted the court decision.

“The creation of this company, which will become effective in the coming weeks, will lastingly reinforce the independence of the Hermès group, the pursuit of its strategy of creativity and artisanal excellence and the respect of its values,” they said in a statement.

Officials at LVMH could not be reached for comment. Colette Neuville, president of the French Association for Minority Shareholders, or ADAM, said she was disappointed by the court’s decision.

“From a legal standpoint, this sets an extremely dangerous precedent and completely threatens the legal security of minority shareholders in family-owned groups in future,” she said. Neuville added that she has two months to decide on the next step, which could include a further appeal.

Olivier Diaz, a lawyer for Hermès, said any such move would not block the creation of the holding company.

Though LVMH chairman and chief executive officer Arnault has said he is not seeking full control of the maker of Birkin handbags and silk scarves, Hermès has vowed to protect itself from what it considers an unwelcome suitor.

LVMH revealed in July it had increased its stake in Hermès to 21.4 percent in the first half from the 20.2 percent it declared last December.

Hermès chief executive officer Patrick Thomas, speaking in Shanghai where he was celebrating the first anniversary of the group’s Chinese luxury label Shang Xia, reiterated his wish to see LVMH reduce its shareholding. Thomas made the comments before the publication of the Paris court ruling.

“The outcome is that Hermès will become very independent, and one day there will be a solution that we will find with them. We are not at war. It’s not a financial fight, it’s a cultural one,” he said. “I’m not saying that theirs is bad and ours is good, I’m just saying it’s different, so we don’t want to live with them.”

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 holding company will group 50.2 percent of the company’s capital and will have priority purchasing rights on the remaining shares held by the family members participating in the initiative — some 12.6 percent of capital.

“The majority will remain within the family, which is a very strong signal of its attachment to the company and the fact that it absolutely does not want to sell, whether in the short, medium or long term,” Diaz said.

He added that roughly 10 percent of capital was held by family members who are not joining the holding group. They include Nicolas Puech, the brother of Bertrand Puech, the executive chairman of Emile Hermès Sarl, which represents the family shareholders.

Trading in Hermès shares was suspended Thursday in expectation of the ruling, and was scheduled to resume today. Shares in Hermès closed up 2.5 percent Wednesday at 268.30 euros, or $367.24 at current exchange rates, representing a 71 percent leap since the start of the year.