LVMH Takes Minority Stake in Hermès
Luxury conglomerate LVMH said Saturday it had taken a 14.2 percent stake in Hermes but denied it wanted to take over the French luxury goods firm. The company controlled by French businessman Bernard Arnault said it wanted to boost the stake to 17.1 percent at a total cost of 1.45 billion euros (two billion dollars) […]
Luxury conglomerate LVMH said Saturday it had taken a 14.2 percent stake in Hermes but denied it wanted to take over the French luxury goods firm.
The company controlled by French businessman Bernard Arnault said it wanted to boost the stake to 17.1 percent at a total cost of 1.45 billion euros (two billion dollars) but was not seeking even representation on the Hermes board.
The move makes LVMH the largest Hermes shareholder after the heirs to the family share of around 70 percent.
There has been speculation about the future of Hermes, known for its fine leather goods and silk scarves, since the death of its charismatic head Jean-Louis Dumas.
In a statement LVMH said that it holds 15,016,000 shares of Hermes International, with the objective “to be a long-term shareholder of Hermes and to contribute to the preservation of the family and French attributes which are at the heart of the global success of this iconic brand.”
It added that “LVMH fully supports the strategy implemented by the founding family and the management team, who have made the brand one of the jewels of the luxury industry.
“LVMH has no intention of launching a tender offer, taking control of Hermes nor seeking Board representation.”
The statement said LVMH also holds derivative instruments over 3,001,246 Hermes shares and intends to request their conversion.
“LVMH would then hold a total of 18,017,246 Hermes International shares, or 17.1 percent of its capital. The total cost of this shareholding would, in this case, be 1.45 billion euros.”
Previously LVMH owned less than five percent of Hermes shares, the threshold beyond which shareholders must declare themselves.
Around 20 percent of Hermes’ capital was floated in 1993. The rest was until now controlled by the family, around 40 people, and the company’s management.
A few weeks ago, the head of Hermes’ supervisory board Jerome Guerrand sold 24,257 shares for 4.14 million euros, or around 0.02 percent of the company’s capital. It was not known who else sold shares to Arnault and LVMH.
Arnault reportedly paid 80 euros (around 111 dollars) a share for LVMH’s slice, while Hermes shares were at 176 euros at close on Friday.
“It’s a magnificent brand, with incredible savoir-faire, we’d rather LVMH invest in it than someone else,” said a source close to the deal.
“It’s a very well-managed company, which got through the crisis without problems, there’s no reason to change anything in its strategy,” said a luxury goods sector analyst.
The analyst said that Arnault wanted to “shelter this family company, by protecting it from a foreign group taking control.”
The luxury products sector has shown strong growth since the beginning of the year after the global slump hit their business badly in 2009.
LVMH, which counts among its brands Givenchy, Dior and Guerlain perfumes alongside Moet and Chandon and Dom Perignon champagnes, said on October 14 its sales had risen sharply, driven largely by Asia and by demand for champagne.
In July Hermes reported a near 23-percent surge in first half sales and doubled its revenue forecast for the year, with Asia continuing to be the driver.
Via AFP