Her­mes fam­ily to dis­cuss takeover de­fenses

The Pak Banker - - Company& -

PARIS: Her­mes In­ter­na­tional SCA's fam­ily share­hold­ers meet to­day and may dis­cuss ways they can sell stock with­out ri­val LVMH Moet Hen­nessy Louis Vuit­ton SA gain­ing con­trol, ac­cord­ing to two peo­ple fa­mil­iar with the plans.

The fam­ily mem­bers, who own 73.4 per­cent of the Paris­based lux­ury-goods maker, may want flex­i­bil­ity to sell shares with­out the worry that LVMH might be buy­ing them, said one of the peo­ple, who asked not to be iden­ti­fied as the talks are pri­vate.

LVMH, the world's largest lux­ury-goods maker, said in Oc­to­ber it would con­sider buy­ing more Her­mes shares af­ter build­ing a 17.1 per­cent stake us­ing eq­uity swaps. LVMH has said it doesn't in­tend to seek a board seat or con­trol of its ri­val. Her­mes hired BNP Paribas SA and Bank of Amer­ica Corp. as ad­vis­ers last month to help fend off a pos­si­ble LVMH takeover bid.

"The whole ac­tion is, from an in­sti­tu­tional in­vestor point of view, a bit an­noy­ing," said Scilla Huang Sun, head of eq­ui­ties at Swiss & Global As­set Man­age­ment in Zurich, who over­sees about 4 bil­lion Swiss francs ($4.1 bil­lion), in­clud­ing LVMH and Her­mes shares. "Her­mes is a great brand and well-man­aged busi­ness, but the free float is ob­vi­ously lower and for the next cou­ple of months the stock price will re­main volatile."

Her­mes fell 9.3 per­cent, or 15.50 eu­ros, to 150.55 eu­ros to­day in Paris trad­ing. The stock has surged 61 per­cent this year, boost­ing the com­pany's mar­ket value to 15.9 bil­lion eu­ros ($21.3 bil­lion). LVMH stock de­clined 0.4 per­cent to 121.70 eu­ros, par­ing its gain this year to 55 per­cent and valu­ing the com­pany at 59.6 bil­lion eu­ros.

As an SCA, or So­ci­ete en Com­man­dite par Ac­tions, Her­mes has a struc­ture that al­lows mem­bers of its found­ing fam­ily to keep con­trol of de­ci­sion-mak­ing even if they be­come mi­nor­ity share­hold­ers. The fact that the fam­ily may feel the need to de­vise a new struc­ture means "the SCA doesn't se­cure their cap­i­tal," Co­lette Neuville, pres­i­dent of mi­nor­ity share­holder ac­tivist group Adam, said yes­ter­day in an in­ter­view.

Op­tions for fam­ily mem­bers in­clude plac­ing their stock in a new un­listed hold­ing com­pany, Le Jour­nal du Di­manche re­ported Nov. 28. Mem­bers of the found­ing fam­i­lies will be asked to give up some of their rights to sell shares, the news­pa­per said.

The for­ma­tion of a hold­ing com­pany or an agree­ment be­tween the fam­ily share­hold­ers to or­ga­nize con­trol of the share cap­i­tal would make "a very sig­nif­i­cant part" of Her­mes's stock in­ac­ces­si­ble, Neuville wrote in a Dec. 1 let­ter to France's mar­ket reg­u­la­tor ob­tained by Bloomberg News.

A for­mal align­ment of the relatives' shares means they would be act­ing in con­cert un­der the rules of French stock mar­ket reg­u­la­tor Au­torite des Marches Fi­nanciers, oblig­ing them to make a bid for the rest of the stock, ac­cord­ing to Neuville.

Lawyers ad­vis­ing Her­mes on the pos­si­ble struc­tures avail­able for the fam­ily to bar­ri­cade their stake dis­puted Neuville's read­ing of the rules, she said. The lawyers took the view that Her­mes's SCA sta­tus means the fam­ily al­ready con­trols the com­pany and that any new struc­ture to emerge from to­day's meet­ing would war­rant a sim­ple "re­clas­si­fi­ca­tion" to the AMF of their ex­ist­ing po­si­tion, she said.

Her­mes lawyer Olivier Diaz re­ferred calls by Bloomberg News to a com­pany spokes­woman. Chris­tel Denef, a spokes­woman for Her­mes, said the com­pany has no im­me­di­ate com­ment. -Bloomberg

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