As was widely reported last week, luxury giant LVMH now owns over 17% of competitor Hermes, and although the company has publicly stated that it has no plans to acquire more shares of the French family-owned company in the next six months, luxury watchers remain atwitter over what the future may hold for two of the world’s largest names in handbags after that time period expires.
Now that more of the story behind LVMH’s share purchases has emerged, Women’s Wear Daily reports that the company used a number of stealth maneuvers, including cash-settle equity swaps and use of several cannily named LVMH subsidiaries, to increase its stake in Hermes by over 14% without identifying itself as a competitor to Hermes brass. Seemingly adding insult to injury, LVMH notified Hermes of these developments only hours before releasing the information to the general public. So not only did Hermes not knowingly sell the shares to LVMH, but LVMH execs also seemed to be well aware that the family wouldn’t have sold, if given all the pertinent information.
For its part, the family that has been in charge of Hermes for five generations is dedicated to ensuring that the company continues to be family-owned and family-run, according to a Wednesday interview in French newspaper Le Figaro. According to brand manager Patrick Thomas, “Hermes has absolutely no need of help, support or guardian.” He continues, “This culture (of craftmanship and strong traditions) is hardly compatible with one of a big group. It is not a financial battle, it’s a cultural battle.”
As tempting as it is get emotionally attached to the brands we patronize, it’s hard to blame LVMH’s executives for their acute interest in the French accessories giant. Luxury goods are a multibillion dollar international industry and Hermes would be a significant jewel in any conglomerate’s crown. It’s also worth noting that LVMH doesn’t seem to have done anything illegal in its most recent round of purchases, although French stock market regulator AMF is looking in to the company’s tactics. One thing is for sure, though: News of how LVMH acquired such a large portion of Hermes will certainly turn up the heat on talk that the conglomerate may be looking to expand its role within Hermes in the not-so-distant future. Remember, Arnault built his fortune on a foundation of hostile takeovers.
Citations:
Reuters: Luxury group Hermes tells LVMH to back off”
Le Figaro: Les entreprises familiales ont bien résisté à la crise
Women’s Wear Daily: Regulator Reportedly Eyeing LVMH Purchases
Image via Racked.com.
Definitely smells like a possible hostile takeover in the future. Hermes should be concerned and on guard!
As a stockbroker for many years i have to tell you that buying up stock in this manner is very common and I doubt the regulators will find it illegal. As an investment bank buying shares of Hermes for your client, in this case LVMH, it would be very unprofessional to disclose who your client is. There are regulations in place that say that only when LVMH own a certain % do they have to disclose it to the company in question and to the public. So Amanda when you say that LVMH didnt notify Hermes…..they are definitely not supposed to. As for a major takeover… if the family do own 73% stake it will be very difficult for LVMH to hold a majority stake unless a family member decides to sell up. I think the point here is that LVMH want a large enough stake to able to hold a position on the board of directors…which they would probably get with a 17% stake. Also just to clarify LVMH can legally buy anything in the stock mkt that is freefloat which means the % that is not owned by family that is trading in the stock market. So i sincerely doubt that LVMH own 17% and the family own 73%. From what i see in bloomberg 35% is free float which means the family only own 65% of the company. It would be a good time to buy some Hermes stock because if LVMH are gonna start sweeping the market to buy up Hermes shs they are gonna seriously drive the price up.
Amanda, LVMH held cash swaps and as soon as they became payable in shares they disclosed what they held in Hermes as a %. What they did is not illegal as current regulation on disclosure does not include swaps. French regulators are now looking into whether they should tighten disclosure laws. So in effect LVMH has played by the rules albeit in a rather sneaky way.
I believe that one of the articles (perhaps the WWD one) said that in France, some sort of declaration is required when a company is buying more than 5% of another company, which apparently didn’t happen in this situation and is what raised the attention of regulators.
Actually, here’s the portion of the WWD article I’m referring to, I just found it:
“In France, companies are required to declare stock purchases when they surpass 5 percent of the share capital.
LVMH took analysts by surprise when it revealed on Oct. 23 that it crossed that threshold with transactions to purchase more than 15 million shares, representing 14.2 percent of Hermès — one of the luxury world’s greatest trophy brands.”
Perhaps you can shed more like on what this means than I can, it’s possible that I interpreted it incorrectly.
Dont you people ever read the numbers, the family owns 73% of the company, by the sounds of things the family is unequivocally united, LVMH cant take it over unless their is a mass exodus of family shareholders selling and I would presume in that situation, Hermes International would buy the shares to block LVMH. Stop being drama queens about the whole situation just for the sake of a comment.
Do you understand the concept “hostile takeover”? If the family is in complete agreement and there isn’t enough shares on the market – sure Hermes may be safe for now. But that could easily change!
Francis, you are so naive. If LVMG can acquire 17% without anyone knowing, the possibilities are endless.
Next, it could be someone else we know or do not even know right now who might use underhanded tactics to acquire those shares. For example, some of the family members might be tricked into selling their shares and one way would be to get them into huge debts or blackmail.
Like the article stated, it is a multi billion dollar business. No one is above this kind of money.
If you take a look at the articles cited, I think it explains pretty clearly why a united Hermes family might not necessarily be enough, in the longterm. A company not wanting to be overtaken doesn’t often mean that it won’t happen eventually, if the conglomerate who wants it is motivated enough. Just depends on how badly LVMH wants Hermes.
no need to be rude really
LVMH has been doing a pretty good job destructing French heritage – LV has lost all its credibility when it comes to true luxury and quality over quantitiy, as have many other brands mr. Arnauld has added to LVMH. I just hope Hermes can be saved from this, otherwise I’ll not buy any more from them.
The quality of Louis Vuitton’s leather goods is not that good. It’s kinda nasty that LVMH has eaten up all the major luxy brands on the market. sigh
I think now, more than ever, the words of “Stripes” are appropriate.
“Lighten up, Francis.”
I guess I will have to convince my husband to let me have that much desired Hermes bag now as I would never purchase from them if LVMH did a hostile takeover. It would turn the company into just another purse company who charges too much which I have no interest in being a part of.
Let’s hope the French market regulators would find the LVMH’s stake purchase illegal and be able to protect Hermes from the LVMH’s global appetite to commercialize their French heritage of true luxury.
Post these comments about LV quality, etc… in the LV section of the forum. Somebody is buying that crap. Look at those numbers – I just don’t understand the appeal of a mass-produced, logo-ridden product that is knocked off from here to Mars.
lvmh has always been one of the greatest luxury brand holder. the only thing which matters is that in the world of fashion and luxury, we have competitions running, not in financial matters but in style, culture and fashionability. whose style and imagination and artistry would capture luxurious and fashion inclined people would prevail than the brand can boast its name to all people living in the world of fashion and luxury. it won’t be good, if lvmh takes over the brand hermes, because i believe they are the 2 best brands (hermes & louis vuitton) in designing and manufacturing greatest bags. challenges and quirkiness has always been a part of fashion, so if the 2 merged and competition would cease, i think the 2 brands wont be as interesting as it is in a our world now.
actually,i don’t like louis vuitton, because it is sososo common and much commoners are using, i love HERMES and MARC JACOBS rather.
correct me if I’m wrong but Marc Jacobs the brand is also owned by LVMH together with Fendi?
I hate lvmh arnault is the pimp of luxury brands , I hope they never take over !!!!!!!
Capitalism at its finest. I love it!
Capitalism all for it actually I cheer for it arnault and the death of what is already the queen of capitalism and global tradition hmmmmmm not so much I mean please evn Marc Jacobs wears more birkins than vuitton and he designs them there’s areason for that vuitton and it sister companies are cheap cheap cheap !!!!!!
The quality of Coach¡¯s leather goods is not that good. It¡¯s kinda nasty that coach has eaten up all the major luxy brands on the US market. Deep sigh! you can see this website:luxurydesignerbag.com
LMVH is taking over :/ (ipad)
oh wow.. hmm.. not particularly sure if it is good or bad as i’m not related to any brands in any way, except for being a consumer – and not yet hermes, though..
but when talking about stocks, i would really be interested in buying them too, if i have the money! (ipad)
Love Hermes. (ipad)
Running a business is hard work. (ipad)
love hermes (ipad)
cant afford it though 🙂 (ipad)
maybe one day (ipad)
what a big business (ipad)
🙂 (ipad)
hermes is taking over (ipad)
Go Hermes! If LV takes over, the hardware on Hermes will fade & tarnish since they LV doesn’t use genuine brass…eeewww I’d never spend money on a LV, nonleather monogrammed garbage. If LV takes over Herms, I’ll be sure not to purchase anything that is affiliated with LV!!!
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