Byline: Sarah Raper

Paris — LVMH is hoping a Dutch court will take some of the sting out of its spurned 1999 bid for Gucci with some cold, hard cash.
In the latest chapter in the war between the French luxury conglomerate and its rival Pinault-Printemps-Redoute, LVMH Moet Hennessy Louis Vuitton filed a new lawsuit against Gucci and PPR seeking to compel them to make an offer for all shares of Gucci, which is registered in the Netherlands.
A relic of its failed bid to acquire Gucci last year, LVMH still holds 20 percent of Gucci’s stock. LVMH is petitioning the Amsterdam District Court to order PPR to make a public offer for all Gucci shares.
A spokesman for LVMH said, “This is a complementary suit to the one we filed in district court last year. It increases the pressure on PPR to launch a full takeover bid.” He added that no ruling was expected before summer.
Ironically, during last year’s takeover battle between LVMH and PPR, it was said that Arnault sought to gain control of Gucci without paying the full price for the company. Now, it is Arnault who is looking to block PPR from controlling the venerable Italian firm unless it pays for the whole company.
But PPR’s hands are tied: As part of its deal with Gucci, PPR signed an agreement to stand still at 42 percent for five years. That means that, while dumping the stock might depress its price, LVMH cannot sell directly to PPR.
Gucci chairman and chief executive Domenico De Sole confirmed that the company had received a letter from LVMH about the suit last Friday but waved off the new action as “purely and simply a continuation of harassment” and charged that the main purpose was to put a negative spin on Gucci’s yearend earnings, which are due out in one week.
“This new action does not add anything to the case already filed by LVMH that was rejected by the Enterprise Chamber of the Court of Appeal of Amsterdam,” De Sole said in a statement.
A spokesman for PPR said that the company “considered that the matter had already been examined in great depth and very swiftly” by a Dutch court.
Tuesday’s development is the latest wrinkle in a takeover battle that began in January 1999, when LVMH began aggressively acquiring shares of Gucci. In March, PPR burst onto the scene as Gucci’s white knight. PPR announced that it had taken a 40 percent stake in the company via a new share issue, an amount later augmented by 2 percent.
Nearly overnight, that move diluted LVMH’s stake in Gucci from 34 percent to 20 percent. LVMH challenged the share issue in Dutch courts and in May 1999, the Enterprise Chamber ruled against LVMH, all the while noting that the PPR-Gucci alliance “has to be qualified as mismanagement.” LVMH appealed the Enterprise Chamber ruling, quickly turned to the District Court and filed suit there last June.
“Under the terms of [the PPR-Gucci] agreement, the Gucci Supervisory Board transferred control of the company to PPR, at a price significantly below fair value and without requiring a public offer, in violation of the rights of Gucci’s minority shareholders,” LVMH said in its statement.
“We continue to seek to annul the PPR-Gucci agreement, but this new action gives the court an option for reparations,” the LVMH spokesman said.
While the new court case pits the interests of two of Europe’s most acquisitive and dynamic companies against each other, it also reflects the rapid pace of change streaming through the European Union as it seeks legal standards to go with those already put in place for currency.
LVMH pointed out that its new action also was consistent with recent developments toward harmonization in European Law. The Thirteenth Directive of draft code — which has been approved in principle by all EU member countries, including the Netherlands — would require any person taking control of a listed company to make a public offer for all shares in order to ensure fairness to all shareholders. The law has not been enacted pending disputes over its application in Gibraltar.
At last week’s annual meeting for analysts here, LVMH chairman Bernard Arnault hinted that new court actions were a possibility and complained that his influence at Gucci was “not enormous” and that “it’s not so easy to get rid of these shares.”
There was no specific price per share mentioned in the letter to Gucci although LVMH indicated it was calling on the Dutch court to set a fair price, according to a Gucci spokes-man. LVMH is believed to have paid an average price of $69 per share.
On Tuesday, Gucci shares closed at 86 7/8, up 2 3/8 or 2.8 percent, on the New York Stock Exchange.

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