LVMH, Hermes call truce
LUXURY MAJOR AGREES TO END MOVES TO EMBRACE HANDBAG MAKER FOR FIVE YEARS
The agreement ends for five years at least any ambition by LVMH to embrace Hermes
Afour- year shareholder war between two titans on the global luxury products battlefield, Hermes and LVMH, ended with a truce yesterday, driving down Hermes shares and leaving LVMHwith a big profit.
The agreement ends for five years at least any ambition by LVMH to embrace Hermes, known for silk scarves and high- fashion handbags.
Holding in rival
LVMH, a leader in the global luxury business, had built up a holding of slightly more than 23.0 per cent in smaller rival Hermes, opening hostilities by first acquiring 14.2 per cent discreetly in 2010 by means of complex financial instruments.
This holding is now worth about € 6.8 billion ($ 8.9 billion).
The Hermes family, shocked at this initial incursion into their share capital, closed ranks and grouped most of their shares in a holding company.
This had the effect of ringfencing control in the boardroom and closing the door to any takeover by LVMH.
Litigation followed, largely over the legal and financial techniques used by either side, to gain the upper hand.
Under the deal announced by LVMH yesterday, and brokered by the president of the Paris commercial court, LVMH is to distribute all of its shares in Hermes among its own shareholders, and undertakes not to buy any Hermes shares for five years.
The immediate effect of this end to prospects of a bidding war for Hermes, pushed down Hermes shares by 9.38 per cent to € 238.10.
Sources close to the matter said that the agreement would generate a capital gain of