Gucci Group’s lucrative initial public offering in 1995 created a whole new stage for some of the most dramatic moments in the company’s history, from LVMH Moët Hennessy Louis Vuitton’s hostile takeover attempt to an acquisitions spree and Gucci’s ultimate delisting from the stock exchange after PPR’s forced buyout of the group.
Gucci went public in 1995 on the New York and Amsterdam stock exchanges, making it one of the few publicly traded Italian fashion labels, despite a booming IPO market worldwide. Gucci originally wanted to list on the Milan exchange, but the Borsa wouldn’t admit the company because it lacked a profitable track record. At the time, Gucci was emerging from a major restructuring.
The IPO priced the shares at $22 each, on the high end of a range that started at $19 a share and generated $540 million for Gucci before underwriting costs. Demand for shares was so swift that the size of the offering was boosted from an original 16 million shares to 28.2 million shares. The stock rallied 22.2 percent on the first day of trading, Oct. 24, to close at $26.87.
“It was the most exciting thing that ever happened to me in my working life,” chief executive Domenico De Sole told WWD at the time. It was also a lucrative moment for Gucci’s owners at the time, Bahrain-based Investcorp, which raised about $2 billion from the IPO and a secondary share offering in 1996.
Rival LVMH also saw the value of Gucci shares, prompting the French company to amass a Gucci stake of 34.4 percent between June 1998 and February 1999 through a series of transactions. Gucci accused LVMH of a “creeping acquisition,” igniting what was arguably the most vicious power struggle in fashion history, which was played out in Dutch courtrooms and newspaper headlines around the world. It even managed to involve Prada, which had snapped up 9.5 percent of Gucci in 1998 and sold it to LVMH in January 1999. The battle created an intensely bitter rivalry between LVMH and the PPR-Gucci camp. The animosity persists to this day.
“If there’s one thing that was a little bit of naïveté on our part, it’s that when we floated the company, nothing was put [in the company’s bylaws] to protect it from a takeover attempt,” De Sole recalled in a recent interview. “It never crossed my mind….It should have, probably, but it didn’t.”
In March 1999, Gucci found a white knight in another French company, PPR, known at the time as Pinault-Printemps-Redoute. The retailer paid $2.9 billion for 40 percent of Gucci. Gucci issued new shares as part of the deal and LVMH’s stake was diluted to 21 percent.
“I like building things, and this is an opportunity to create a new luxury pole that will, perhaps, one day be the number one in the world,” a grinning François Pinault told journalists after a joint news conference in Paris with De Sole, designer Tom Ford and then-PPR ceo Serge Weinberg to announce the deal.
But PPR and Gucci’s strategic alliance didn’t put an end to the wrangling. Both sides of the takeover continued to do battle in a series of court cases until the three parties struck a deal. LVMH, which, since 1999, was pressuring PPR to launch a full bid for all of Gucci, finally got its way. On Sept. 10, 2001, PPR agreed to buy about 8.4 percent of Gucci from LVMH. PPR also agreed to buy all the Gucci shares it didn’t already own at $101.50 a share — a move that would have cost as much as $5 billion. LVMH sold its residual Gucci shares that December.
Gucci and PPR were hopeful that Gucci’s shares would continue their ascent, surpassing the $101.50 threshold so shareholders wouldn’t tender their stock to PPR. Market consensus backed up that theory. But the 9/11 attacks, the Iraq war and the outbreak of SARS sent the luxury goods industry into a tailspin. In October 2003, Gucci preemptively paid out $15.98 a share to shareholders, lowering the put option price to $85.52.
In April 2004, Gucci shares were hovering near $85.40. Consequently, nearly all shareholders sold to PPR, ending Gucci’s nine-year run as a public company.
Currently, PPR owns 99.48 percent of Gucci shares and is planning a squeeze-out for the remainder.
The buyout coincided with the departures of De Sole and Ford, who left the group in April 2004. Each man received tens of millions of dollars worth of stock options over the years, more than enough money for them to fund their current venture: a Tom Ford brand that started with a beauty deal with the Estée Lauder Cos.
In just two months, April and May 2003, Ford made $38 million by exercising some of his numerous stock options. In 2002, he made about $23 million in similar transactions. De Sole made more than $25 million in a series of trades in January, just three months before leaving the company.