The war rages unabated between Hermès and LVMH – here is the latest update:
- The Hermès families have formed a nonlisted holding company that now controls more than 50 per cent of Hermès International’s capital in order to safeguard against losing majority status. However, there is one roadblock to this plan: French laws necessitate that any entity that takes control of more than one-third shares launch a public offer. Hermès has filed a request with AMF (France’s market regulator) to be exempted from this rule. In the past, AMF has granted dozens of similar exemptions and shall be announcing their current decision within a few weeks.
- LVMH, in the meantime, has assured AMF that it has no intention of taking control of Hermès or making a public offer in the next six months. However, it hasn’t ruled out buying more shares – a quixotic stand, especially given Bernard Arnault’s track record as a corporate raider. Though its been two decades, few have forgotten his pitting of family member against family member to take control of Louis Vuitton in what is considered one of the nastiest takeovers in fashion history.
- AMF is currently investigating the 17.1 percent stake that’s been picked up by Arnault’s company and LVMH “welcomes the move”. The investigation will most probably last several months.
- However, according to industry insider WWD, “…it may take a few years to determine if LVMH Moët Hennessy Louis Vuitton will be able to win control of Hermès International.” A wholly believable assertion, considering it took almost three years for Arnault to win control of Louis Vuitton in the late 1980s and a similar time frame to resolve the Gucci battle in the late 1990s.
- WWD also quotes Pierre Mallevays, managing partner of Savigny Partners, a boutique investment bank specialising in luxury goods, who predicts that the unity of the Hermès family will surely be tested by the exponential increase in its members: “You simply have more and more people that are less involved in the business, and who might prefer to have cash rather than illiquid shares. The real danger is the danger from within.” Consider the numbers: While the fourth generation of founder Thierry Hermès had only three descendants, the sixth generation has approximately 20. Will they all continue seeing eye-to-eye in the future?
- Insiders also note that Hermès’ succession plans could also lead to explosive results as Chief Executive Patrick Thomas approaches retirement. In the absence of a clear successor, family tensions are perhaps inevitable.
- Also inevitable is the escalating war of words, with Hermès making no secret of its dislike for the ongoing events. Patrick Thomas calls Arnault “a visitor in the garden”, while Bertrand Puech, Executive Chairman of Emile Hermès SARL, which represents the family shareholders, told Le Figaro that “The family is saying clearly and unanimously: ‘If you want to be friendly, Monsieur Arnault, then you must withdraw.’ ” Arnault, on the other hand, has maintained his silence, simply stating that he has no intention of taking over Hermès and that the share acquisition is completely in keeping with market regulations.
Keep watching this space for more on the battle of the decade!