PARIS — With LVMH Moët Hennessy Louis Vuitton facing scrutiny about whether it respected market rules in amassing a 22.6 percent stake in Hermès, Bernard Arnault declared Thursday that he came into the holding unexpectedly.Speaking at LVMH’s annual general meeting in Paris, 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, to laughter from the audience.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.The sanctions commission of France’s stock market regulator AMF is due to examine on May 31 whether LVMH respected market rules, according to the LVMH reference document handed out to shareholders. The commission is expected to publish its ruling this summer, capping an investigation launched in November 2010.Separately, LVMH and Hermès are duking it out in court.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.The Hermès complaint is being examined by an investigating magistrate. Avoiding all reference to the ongoing legal battle, Arnault pointed out that LVMH had voted in favor of all resolutions submitted by management at the Hermès shareholders’ meetings it has attended so far.“We want to support their policies and people are assigning us motives in a totally unfounded way. We have no intention at all of increasing our stake to play a role in this company. We want instead to be friendly supporters of one of France’s finest companies — and that’s all,” the LVMH chairman and chief executive officer insisted.Turning back to LVMH, whose shares sank to a six-month low this week following the publication of disappointing first-quarter sales, Arnault reiterated that he was taking a long-term view of success.“This is the result of an intentional strategy,” he said, referring to the performance of LVMH’s fashion and leather goods division, which posted like-for-like sales growth of 3 percent, below market expectations of a 5 percent increase. RELATED STORY: LVMH Q1 Sales Growth Slows >>Arnault is banking on fewer store openings and pricier products to notch up the exclusivity quotient of LVMH’s star brand, Louis Vuitton. “I am interested in Vuitton’s position in 15 years,” he said.The luxury titan added that despite the depressed economic climate in Europe, he remained “relatively confident” about business prospects this year, noting that the world economy was set to grow by 3 percent, with the U.S. expected to log 2 percent growth.Arnault had plenty of gripes about France’s high taxes and cumbersome administration, but when asked whether he had any advice for embattled Socialist President François Hollande, he demurred. “Frankly, I don’t know if I’m qualified to give any advice in the current situation, and in any case, I am not sure that the government is really following any of the advice that is being lavished on it on a daily basis,” he said.Arnault, France’s wealthiest man, was criticized by Hollande and senior government officials last year after it emerged that he had applied for Belgian citizenship, sparking speculation that he was seeking to escape a planned 75 percent tax on high revenues in France.Arnault stated repeatedly that he would continue paying taxes in France, but weary of the polemic that has raged around his loyalties, he revealed last week that he was withdrawing his Belgian citizenship application.He told the shareholders’ meeting Thursday that fears of tax hikes in France had prompted a number of senior LVMH executives to consider moving abroad. “I try to prevent it,” he added.Hollande said last month that companies would now have to pay the 75 percent tax on salaries over one million euros, or $1.3 million, after his initial project for a “supertax” on individuals was knocked down by the constitutional court.LVMH chief financial officer Jean-Jacques Guiony said that while it was difficult to gauge the impact of the measure, it should not dent significantly the company’s coffers. “Unfortunately, the company pays,” Arnault added. “Its employees are spared a little, so I hope that will incite them to stay, rather than leave the country.”Separately, he lamented the administrative snags that have delayed the openings of the Frank Gehry-designed Louis Vuitton Foundation for Creation in the Bois de Boulogne, as well as the Samaritaine retail and housing project in central Paris, which is now expected to bow in 2016.“Even though the location is fantastic, and our project represents a major investment and will create close to 2,000 jobs, there are organizations that are striving to block the process,” Arnault said.
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