It has been quite the battle over the past 4 years between two fashion powerhouses: Louis Vuitton Moët Hennessey, arguably the most powerful luxury goods conglomerate in the world, and Hermès, one of the most revered fashion houses, where lawsuits have been traded and claims of hostile takeovers and slander have been exchanged. And, today, the two finally called a truce with an agreement brokered by Paris Commercial Court’s president, Frank Gentin.
Let’s get some background first and start at the beginning. In October of 2010, LVMH stunned not only family-controlled Hermès but also the fashion industry by announcing it had acquired a 17.1% stake in Hermès. Many, including the luxury brand, viewed this as the beginnings of a hostile takeover, perhaps another luxury brand jewel for Bernard Arnault, Chairman and CEO of LVMH, to place in his crown of luxury brands, alongside Louis Vuitton, Christian Dior, Givenchy and others.
Arnault, however, insisted that the acquisition was friendly and that LVMH did not intend to takeover Hermès. Unsatisfied with Arnault’s promises, the Hermès family shareholders created a holding company that controlled 50.2% of the company’s shares to bar Arnault or LVMH from gaining control of the brand. The Dumas, Puech and Guerrand families all together own an excess of 70% of the shares, under a partnership agreement that states that the families maintain control of the management of the brand.
The brand also instituted a criminal action against LVMH claiming the luxury goods conglomerate used insider trading to acquire its shares. LVMH retaliated with lawsuit against Hermès, alleging defamation and slander.
Then, in 2013, LVMH increased its shares to 23.1%. This angered the Autorité des Marchés Fianciers, which governs and regulates the market and which fined LVMH 8 million euros for failing to disclose that its stake in Hermès was increasing. Normally, under French law, if an entity has acquired more than 5% of a company’s shares, it must report. Here, LVMH did swap deals with three different banks, who each owned shares amounting to less than 5% of Hermès. The Autorité decided that while technically legal, this maneuvering broke the spirit of the regulations and thus LVMH was fined.
In June of that year, Hermès filed a lawsuit in Paris asking a court to annul the original 17.1% stake acquired by LVMH. The luxury goods conglomerate retaliated once again with a lawsuit for slander.
And so we come to today, where it was announced that an agreement had been made between the two companies. The agreement states that LVMH will distribute its shares of Hermès back to the brand through Groupe Arnault, which owns 70% of Christian Dior, which in turn owns 45% of LVMH. The stake is worth an estimated 6.5 billion euros and LVMH will receive a capital gain of about 3.8 billion euros. At the end of the return of the shares, Groupe Arnault will have an 8.5% stake in Hermès. LVMH also agreed to not acquire any Hermès shares over the next 5 years.
A joint statement released by both companies states that the CEOs of both companies, Arnault of LVMH and Axel Dumas of Hermès “express their satisfaction that relations between the two groups, representatives of France’s savoir-faire, have now been restored.”
And, so a tenuous and strained battle between the two fashion companies that arguably define French fashion comes to a conclusion. It seems that the end result is a win-win. Hermès retains its independence and the families retain their control over a brand that is the epitome of not only French fashion but fashion worldwide. And, LVMH, through Groupe Arnault, will retain an 8.5% stake ensuring a future profit as anyone in fashion can tell you Hermès will continue to be the powerhouse fashion and style-setter that it has been over the past 100 years of its existence.
- “LVMH and Hermès Declare a Truce,” Women’s Wear Daily.
- “LVMH and Hermès Strike a Peace Deal,” TheStreet.
- “LVMH and Hermès Agree to a Truce,” Wall Street Journal.
- Hermès storefront by japanese_craft_construction (Flickr) via Wikimedia Commons
- “Night Ekaterinburg Louis Vuitton” by Владислав Фальшивомонетчик