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Authority Details Hermès Ruling

AMF issued a report late Friday shedding light on its decision to grant Hermès International an exemption from buying out minority shareholders.

PARIS — France’s stock market authority AMF issued a report late Friday shedding light on its decision to grant Hermès International an exemption from buying out minority shareholders in its attempt to fend off a potential takeover bid by LVMH Moët Hennessy Louis Vuitton.

The AMF made the ruling public on Thursday following a meeting of its 16-member committee, but only published a detailed statement more than 24 hours later.

The eagerly awaited decision was the latest twist in a saga that began when LVMH surprised markets in October by revealing it had acquired a 17.1 percent share of the luxury firm’s capital through cash-settled equity swaps, a stake it boosted to 20.2 percent last month. The AMF is separately examining whether LVMH violated market rules by buying the shares via equity derivatives.

Though LVMH chairman and chief executive officer Bernard 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.

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. Still, they want to reinforce that by grouping more than 50 percent of the capital into a nonlisted holding company.

This would normally oblige the luxury firm to launch an offer for the remaining shares, since it would be crossing the threshold of one-third of capital or voting rights. Hermès had asked the AMF for an exemption on the grounds that the family effectively controls the company already.

Colette Neuville, president of the French Association for Minority Shareholders (ADAM), said she would appeal the AMF decision on the grounds that it penalizes holders of the less than 10 percent of the company’s capital that is freely traded — a process that is likely to delay the creation of the holding company by several months.

The AMF said it was aware of ADAM’s objections but had nonetheless ruled in favor of Hermès because it considered that the 52 family members who filed the request effectively control the company.

“They are acting together like a family group in unison according to the provisions of article L. 233-10 of the French Commercial Code for the implementation of a single policy and control the Hermès company together,” it said in the conclusion of the densely worded, five-page ruling.

The document detailed for the first time the 52 family members who have requested to group their shares. They include Bertrand Puech, executive chairman of Emile Hermès Sarl, which represents the family shareholders; Pierre-Alexis Dumas, creative director at Hermès, and Guillaume de Seynes, executive vice president.

This group holds 62.85 percent of the capital and 71.86 percent of voting rights, the AMF said. No single member holds more than 6.3 percent of capital or 7 percent of voting rights, it added. The group includes 33 people who are involved in managing the company in various capacities.

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 52-member group — some 12.6 percent of capital, the ruling said. It confirmed that, including family members who had not joined in the request, Hermès descendants hold more than 70 percent of capital.