PARIS — In a move that could calm tensions between luxury rivals, LVMH Moët Hennessy Louis Vuitton said Tuesday it would not appeal a June 25 decision by France’s stock market regulator that imposed sanctions over the way the luxury conglomerate acquired its initial 17.1 percent stake in Hermès International.
The AMF had ordered LVMH to pay 8 million euros, or $10.6 million at current exchange, the largest fine it has ever imposed.
In a statement released after the close of trading in France, LVMH said it would be justified in appealing the AMF decision, noting it never breached regulations regarding ownership thresholds or engaged in insider trading or market manipulation.
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“However, the interests of LVMH’s shareholders go beyond the defense of these legal principles,” the company said. “Instead, LVMH must also consider the time and cost of further proceedings and the fact that such proceedings would interfere with the sound management of LVMH’s investment in Hermès.”
According to sources, LVMH has already realized a potential capital gain of about 3.5 billion euros, or $4.62 billion, with its investment in Hermès shares.
Hermès executives have repeatedly urged LVMH to reduce its shareholding, and constructed defenses against a full takeover of the family-controlled firm.
Nevertheless, LVMH raised its stake in the maker of Birkin bags and silk scarves to 23.1 percent as of June 30, from 22.6 percent as of Dec. 30, 2012, characterizing its latest investment as an opportunistic move.
LVMH surprised markets in October 2010, revealing it had amassed a large stake in Hermès via cash-settled equity swaps that allowed it to circumvent the usual regulations requiring firms to declare share purchases.
The AMF maintained that LVMH should have made public the transaction it was preparing on June 21, 2010, the date of a phone call between one of its employees and a financial institution allegedly discussing the implications of the potentially growing stake, should the equity swaps be converted into Hermès shares. LVMH informed the AMF in October of that year.
On Tuesday, LVMH noted it would continue to defend itself against the “baseless legal proceedings being pursued by Hermès management to recover compensation for the serious harm their actions have caused.”
A spokeswoman for Hermès declined to comment on Tuesday’s developments.
It is understood Hermès has pending penal and civil suits against LVMH.
Meanwhile, in June, LVMH filed civil charges against an unidentified manager at Hermès, believed to be co-chief executive officer Patrick Thomas, for accusing LVMH of building its stake in Hermès in a “fraudulent” way.