Dec 2, 2010
Handbags and inheritance: Hermes-LVMH fight heats up
Dec 2, 2010
PARIS, Dec 2, 2010 (AFP) - Shares in French luxury fashion group Hermes are a hot item on the stock market because traders see the founding family mounting a bitter takeover defence against giant predator LVMH.
Hermes-LVMH battle: a story of big brands, big personalities, big money and a big families
Hermes is a chic brand for products ranging from handbags to scarves and perfume while French company LVMH or Louis-Vuitton Moet Hennessy is the world's largest luxury goods group, specialising in wines and spirits, fashion and leather goods, perfumes, watches and jewellery.
On Friday, the extended Hermes family meets and is expected to launch a counter attack against LVMH which acquired 17.1 percent of Hermes by stealth in October.
Shares in Hermes rose 1.46 percent to 159.95 euros by midday on Thursday, showing an increase of 15 percent over the week so far.
Hermes has come a long way in 170 years since Thierry Hermes rode the horse business to make bags for saddles for the nobility.
Today, the French company is in the business of making the rich and middle classes, increasingly in rising emerging economies, feel and look good.
Luxury is proving to be a sector with ever expanding appeal in an ever more global market, and strides onwards and upwards in bad times as well as good.
The battle in prospect is a story of big brands, big personalities, big money and a big family.
LVMH employs 77,000 people and has a market value of nearly 60 billion billion euros, compared with Hermes on 16.8 billion euros.
On November 9, shortly after LVMH's presence was revealed, Hermes reported sales in the first nine months of the year amounted to 1.67 billion euros (2.18 billion dollars) and that sales for the year were on target to increase by 15 pecent.
The company "is on the way to probably the best year in at least 10 years and perhaps in all its history," Hermes Patrick Thomas said.
About 70 inheritors of the six-generation Hermes family business meet on Friday to discuss how to use their combined 73.4 percent in the face of the unwelcome raid by LVMH.
One option is to create a holding company, which would not be quoted on the stock market and so would be closed to outside investors, to house all of the interests held by the family.
Another option is an agreement for the family to act together to keep the invader at the gates of the family jewels.
Meanwhile a high-profile defender of the rights of small shareholders in companies, Colette Neuville, has urged the stock market authority not to exempt the family from an obligation under such circumstances to make a bid to acquire the entire share capital.
For several days, there has been heavy trading in Hermes shares.
One analyst, who declined to be named, commented: "One can see there has been speculative activity for several days because investors consider that it is increasingly likely that LVMH will acquire more shares or launch a takeover."
The shares are still below the record high of more than 200 euros they reached immediately after LVMH announced that it had built up its stake. Shares in LVMH were showing a rise of 1.05 percent on Thursday to 119.68 euros.
LVMH has been built into one of the global giants of luxury propucts by Bernard Arnault, who insists that his sudden arrival in Hermes is "friendly."
To those who manage Hermes for the family, the manoeuvre looks hostile.
"If you want to be friendly, Mr. Arnault, you should withdraw," Hermes executive Bertrand Puech, an heir of Emile Hermes who switched the company into fashion, said last month. "We're artisans, our goal is to make the best products in the world. We're not in luxury, we're in quality."
To observers the stand-off recalls a tremendous takeover battle for another once family-owned business, Gucci of Italy, which ended in 2001.
That contest was fought out with a sudden stock issue, courtroom clashes and eventually defeat for LVMH and Arnault at the hands of big French rival PPR, headed then by its founder Francois Pinault, now run by his son. Gucci had appealed to PPR as a defensive "white knight" to drive off LVMH.
The French stock market authority AMF has opened an investigation into the method used by LVMH to snap up its holding in Hermes. LVMH insists that it acted within the rules.
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