Byline: Miles Socha

AMSTERDAM — The war over Gucci is getting even bloodier — and with no cease-fire in sight.
LVMH Moet Hennessy Louis Vuitton had its day in court here, urging the Enterprise Chamber of the Amsterdam Court of Appeals to investigate mismanagement at Gucci and ultimately cancel the alliance between Gucci and Pinault-Printemps-Redoute. But it will have to wait until March 8 for a decision.
After a day of explosive testimony, with allegations of stolen or leaked documents, sanitized meeting minutes — and a surprise offer from LVMH to tender its shares if PPR made a full bid at $100 — the panel of five judges announced late last night that it will sequester to weigh the testimony.
And it was hefty, with the pile of documents mounting after almost nine consecutive hours of testimony from tag teams of black-robed Dutch lawyers representing PPR, Gucci, LVMH and several minority shareholder associations.
As in similar hearings in Dutch courts over the Gucci issue, both sides claimed victory with the persuasiveness of their arguments — and they let accusations fly inside and outside the courtroom.
As expected, the granting of millions of stock options to Gucci chairman and chief executive Domenico De Sole and creative director Tom Ford was the centerpiece of LVMH’s case, which sought to link the shares to the white night maneuver of PPR in March 1999, which took a controlling 42 percent stake in Gucci, diluting LVMH’s stake to its current 20.6 percent.
Meanwhile, lawyers for PPR and Gucci sought to characterize LVMH’s efforts in the Enterprise Chamber as contrary to sundry legal precedents and its request for an inquiry as superfluous. Further, it accused the French group of introducing new facts, “manufactured allegations” and conducting legal harassment to hinder and discredit a key competitor.
Perhaps the most dramatic testimony came in the form of a 13-page statement from LVMH chairman Bernard Arnault, in response to memorandums submitted to the court by Gucci which, Arnault said, include “personal conversations I had with Mr. De Sole in January and February 1999, amongst other things.
“I was very surprised to learn+that Mr. De Sole had made these conversations public, when it was formally agreed at the time that they remain strictly confidential.”
Arnault goes on to accuse De Sole of “distorting” accounts of the period from January to March 1999, maintaining that LVMH never had, and still does not, have any interest in taking control of Gucci by stealth.
Arnault also questioned Gucci’s justification for the PPR alliance: that the $3 billion it received would help it launch a multi-brand strategy. “There was no need to place Gucci under PPR’s control+Gucci could have easily raised capital of the same amount on the markets. This would have allowed Gucci to develop the same strategy while remaining independent.”
Toward 7:30 Thursday night, with the documents piled up high in the mint-green-walled courtroom, the key executives, silent until then, stood up one by one to make their final, often emotionally charged, statements.
“Never was there any deal for me or Tom Ford with PPR in conjunction with our support of the PPR alliance,” De Sole said, his voice tinged with anger in addressing the stock-option charges. “The Arnault statement is completely false.”
Furthermore, he characterized the LVMH testimony as “an effort on their part to destabilize their most important competitor” and he urged the judges not to let the French group win a contest in court that “they can’t achieve in the market.”
Pierre Gode, Arnault’s top strategist and an LVMH board member, stood up next, taking exception to a key Gucci-PPR assertion. It related to the June 2000 deal reached between PPR and LVMH that would have had LVMH tender its shares at $100 as part of a two-step offer for all of Gucci. Ultimately, the deal unraveled, but the dispute over its intricacies continues.
“We never, never, never required that Mr. Ford or Mr. De Sole sell their shares in either the first or the second offer,” Gode said, adding that also “he takes exception to being called a liar.”
He was not alone.
In his statement, Serge Weinberg, chief executive officer of PPR, told the court that the “Gucci-PPR transaction was done in good faith and with full compliance of Dutch laws and without any bribery of any kind. LVMH has no evidence to support its case at all. We have been accused of lying and bribery and that is not acceptable to PPR as a group or to me personally.”
Asked if there was any chance of PPR launching a full bid at $100, which Arnault’s testimony said would not be spurned so long as Gucci’s supervisory board declared the price fair, Weinberg said he would not consider it.
“We are not against working with all the parties involved and finding solutions to this problem,” he told WWD. “But we have to find new routes. The economic situation has changed.” In fact, he characterized LVMH’s surprise announcement that it would now accept last June’s offer as “a side show to try and make people forget that their case is very weak.”
But the LVMH camp maintained that Gucci was shaken by its testimony, which included what it called an anonymous package from a disgruntled shareholder regarding the share options. It included, LVMH’s lawyers said, a memo from Gucci counsel Allan Tuttle on the subject. Gucci said the documents were stolen from its offices.
According to LVMH, the Tuttle memo indicates the 5 million options were granted to Ford and De Sole on June 22, 1999, which contradicted Gucci’s assessment of the timing and the legality of so-called “in-the-money” options.
As reported, LVMH contends that the shares were granted in violation of Gucci’s own rules that the exercise price must be equal to or greater than the market price at the time of the grant. According to its calculations, Ford received $29 million in in-the-money options.
Thursday’s hearing stemmed from a decision last September by the Dutch Supreme Court to annul the ruling that had sanctioned the partnership between PPR and Gucci. That compelled the Enterprise Chamber to reexamine its prior decision and again review an LVMH request to probe Gucci’s management practices.
At that time, LVMH viewed the Supreme Court decision as a major step toward breaking up the Gucci-PPR alliance it so vehemently opposes. Meanwhile, Gucci and PPR said they were confident the Enterprise Chamber would reiterate the favorable decision it made in 1999, when it threw out LVMH’s original request for a probe and upheld the Gucci-PPR alliance.
Ever since March 1999, when Gucci welcomed PPR into the group as its white night and fended off a hostile takeover bid by LVMH, LVMH has accused Gucci of mismanagement and cheating its minority shareholders. Gucci denies those claims and the two have been trading barbs and lawsuits since then.
Besides the March 8 decision on LVMH’s request for an inquiry, other lawsuits, and criminal defamation charges, are pending in Brussels, Amsterdam and Paris.

load comments
blog comments powered by Disqus