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WWD Year In Fashion issue 12/13/2010

Leave it to Bernard Arnault — France’s richest man and one of the most powerful figures in the fashion world — to make one of the boldest and most surprising financial moves of the year.

His October swoop on Hermès International — amassing a 17.1 percent stake via cash-settled equity swaps — was disclosed via a brief press release on a drizzly Saturday in Paris, sending journalists, analysts and regulators scrambling to understand: How did he do that?

This story first appeared in the December 13, 2010 issue of WWD. Subscribe Today.

“This operation is, first and foremost, a peaceful one,” said the chairman and chief executive officer of LVMH Moët Hennessy Louis Vuitton. “We invested in the capital of Hermès for the long term.”

Indeed, the business titan has long expressed admiration for the maker of Birkin bags and silk scarves, a luxury jewel that would fit nicely alongside his collection of couture houses, leather goods specialists, perfume makers, and elite wine and spirits brands.

The three families that control 73.4 percent of Hermès rushed to set up a nonlisted holding to fortify their independence and fend off further stake building. Still, few question the resolve and patience of Arnault, who takes a long-range view on luxury goods, and has proven himself a formidable corporate raider.

Arnault merited other boasting rights in 2010, particularly LVMH’s sharp rebound from the global economic crisis. Sales in the third quarter vaulted 23.6 percent, reflecting the keen appetite of upscale consumers worldwide. Profits in the first half leapt 52.8 percent, and the business titan predicted his “flagship brands,” notably Louis Vuitton, Dior and Fendi, would be in pole position to benefit from an improving economic climate.

Arnault surprised in sundry ways in 2010. In April, he divulged plans to open more Cheval Blanc-branded hotels via a new business activity, LVMH Hotel Management, with locations in Oman and Aswan, Egypt, slated to open in 2012.

In September, LVMH’s private equity arm, L Capital, announced it took a 41 percent in fast growing French contemporary brands Sandro, Maje and Claudie Pierlot.

Finally, in late November, LVMH bought an additional 40.1 percent stake in Société Samaritaine, giving it almost full ownership of a landmark department store that is being overhauled as a complex combining stores, offices, housing and a hotel. The project is slated to be completed in 2013.

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