• France's news in English

Hermès vs LVMH: Battle of brands ends in truce

AFP · 3 Sep 2014, 10:57

Published: 03 Sep 2014 10:57 GMT+02:00

Facebook Twitter Google+ reddit

The agreement ends for five years at least any ambition by LVMH, with vast interests from champagne to luggage, to embrace Hermès, known for silk scarves and high-fashion handbags.

LVMH, a leader in the global luxury business, had built up a holding of slightly more than 23.0 percent in smaller rival Hermès, opening hostilities by first acquiring 14.2 percent discreetly in 2010 by means of complex financial instruments.

This holding is now worth about €6.8 billion ($8.9 billion).

The Hermès 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 ring-fencing 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 on Wednesday, and brokered by the president of the Paris commercial court, LVMH is to distribute all of its shares in Hermès among its own shareholders, and undertakes not to buy any Hermès shares for five years.

The immediate effect of this end to prospects of a bidding war for Hermès, pushed down Hermes shares by 9.38 percent to €238.10.

Sources close to the matter said that the agreement would generate a capital gain of about €2.8 billion for LVMH, and LVMH shares rose by 2.10 percent to €135.85.

Since LVMH revealed in October 2010 that it had secretly built up a holding, shares in Hermes had risen by 64 percent to €262.75 late on Tuesday.

LVMH would therefore have made a profit from the Hermes shares given the sharp rise in the stocks' value.

Story continues below…

The agreement was structured so as to limit the damage to Hermès shares, since an outright sale of the holding could have hit the price far harder.

LVMH was founded by French business tycoon Bernard Arnault, and his own holding company Groupe Arnault, as a shareholder in LVMH and in another Hermès shareholder Dior, will end up with 8.5 percent of Hermès once the shares have been distributed, an operation to be completed by December 20th.

At brokers Barclays Bourse in Paris, director Franklin Pichard said: "The speculative premium for Hermès shares has disappeared, hence the plunge in the price this morning. However, investors welcome the distribution to come for shareholders in LVMH and Dior."

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
France to clear 'Jungle' migrant camp Monday
Migrants will be bussed from the camp to some 300 temporary accommodation centres around France. Photo: Denis Charlet/ AFP

The "Jungle" migrant camp on France's northern coast will be cleared of its residents on Monday before being demolished, authorities said Friday.

How life for expats in France has changed over the years
A market in Eymet, southwestern France. Photo: AFP

Foreigners in France explain how life has changed over the years.

London calling for Calais youths, but only a chosen few
Photo: AFP

Dozens of Calais minors are still hanging their hopes on help from the UK, but not all will be so lucky.

17 different ways to talk about sex in French
Photo: Helga Weber/Flickr

Fancy a quick run with the one-legged man?

Yikes! This is what a rat-infested French jail looks like
Photo: YouTube/France Bleu TV.

This video is not for sufferers of ratophobia (or musophobia as the condition is officially called).

France to allow Baby Jesus in Town Halls this Christmas
Photo: AFP

Mary, Joseph, and baby Jesus are safe to go on display again this year, it seems.

National Front posts locations of migrants in French town
The National Front courts controversy. Photo: AFP

"Local tax payers have a right to know," says local far-right party chief.

Paris thieves use tear gas to steal €500,000 of watches
Photo: AFP

The thieves pretended to be couriers then threatened staff with tear gas to get the watches.

Bataclan survivor recounts attack in chilling drawings
Photo: BFMTV screengrab

One survivor has recounted the horrific night through illustrations.

Anger among French police grows as Hollande vows talks
French police demonstrate on the Champs Elysées. Photo: AFP

A fourth night of protests shows government efforts to ease anger among French police have been fruitless.

Sponsored Article
How to vote absentee from abroad in the US elections
Why Toulouse is THE place to be in France right now
Sponsored Article
Last chance to vote absentee in the US elections
Video: New homage to Paris shows the 'real side' of city
The 'most dangerous' animals you can find in France
Sponsored Article
How to vote absentee from abroad in the US elections
Swap London fogs for Paris frogs: France woos the Brits
Anger after presenter kisses woman's breasts on live TV
Is France finally set for a cold winter this year?
IN PICS: The story of the 'ghost Metro stations' of Paris
How to make France's 'most-loved' dish: Magret de Canard
Welcome to the flipside: 'I'm not living the dream in France'
Do the French really still eat frogs' legs?
French 'delicacies' foreigners really find hard to stomach
French are the 'world's most pessimistic' about the future
Why the French should not be gloomy about the future
This is the most useful French lesson you will ever have. How to get angry
Why is there a giant clitoris in a field in southern France?
French pastry wars: Pain au chocolat versus chocolatine
Countdown: The ten dishes the French love the most
Expats or immigrants in France: Is there a difference?
How the French reinvented dozens of English words
The ups and downs of being both French and English
How Brexit vote has changed life for expats in France
Twelve French insults we'd love to have in English
What's on in France: Ten of the best events in October
jobs available