The Secret History of the peace signed between LVMH and Hermes
Bernard Arnault and Axel Dumas buried the hatchet Tuesday night after a rare and rich conflict turmoil. But the agreement seems to satisfy both parties.
It is more than 22 hours when Axel Dumas, president of Hermes and Bernard Arnault, CEO of LVMH found Tuesday, September 2 in the office of Frank Gentin, President of the Commercial Court of Paris to sign the agreement to be buried near four years of fighting. Frank Gentin is a veteran of difficult cases. He worked this summer on the Vivarte folder and also managed the conflict between the Casino and Galeries Lafayette on Monoprix . This is the first time the two men met Axel Dumas had so far refused to meet with the boss of LVMH. The meeting will be short, the respective boards with all marked during the weekend.
A few hours before the signing, it is the boards of Dior and LVMH, which had given the green light to this extraordinary operation. Bernard Arnault group that has over 23% stake in its rival will distribute all of its shares to its shareholders Hermes and agrees not to purchase securities for five years.
The transaction was structured so as not to destabilize the course of the Hermes share to its shareholders and is committed not to buy new titles for five years. The normalization of relations between the two groups will result in a distribution to shareholders of LVMH shares worth 6.4 billion euros. Groupe Arnault, the holding company of Bernard Arnault heritage will end up ultimately with 8.5% stake in Hermes. This transaction will enable Hermes to a more normalized floating for a company of this size it will increase from 7% to 22%.
The frustrated ambitions of luxury giant
Bernard Arnault is the epilogue of a soap opera that will have spilled much ink. Although LVMH ensures repeatedly that he did not want to take control of Hermes, this message of kindness was never taken seriously audible. In 2010, the Hermes family is still in shock over what she saw as an "intrusion".
LVMH announces first have to be 17% a few weeks later hold more than 20%, then 23%. Everyone is convinced that Bernard Arnault will eventually control of the house and that it is not just a financial investment operation.
By a massive entry of Hermes Capital, Bernard Arnault hope then recompose family ownership as it proceeded at Carrefour. But the three family branches that make up the ownership of Hermes and who were not always on the same wavelength this common enemy sees the new engine of their unit. Within weeks, they build a fortress, a holding company that controls 51 H locks almost all holdings homes.
Hermes works his communication. It arises first victim, a classic mode. Then changes gear ratio and attack his opponent strategically systematically opposing Hermes Vuitton, the culture of premium craftsmanship than mass production, sustainability in the ephemeral. In short, the legitimate and the other brand. It's more subtle. In the opinion, the message is getting through. LVMH sends against-fires, organizes events like The Special Days but the damage is done.
A record high legal risks
Then comes the sequence of judicial proceedings. And that includes the AMF detailing in public, the complex issue of LVMH stake in Hermes. "We realize that the ongoing legal proceedings are not well understood by the media, said a friend of Bernard Arnault, some media are quick to write that we are condemned for insider trading while it is of lack of information. "
LVMH will pay 8 million euros fine but will waive appeal. In the entourage of Bernard Arnault some already argue for release. There are rumors of a sale of the stake to LVMH Qatari fund. The intent is taken seriously enough that beginning in July 2012, Patrick Thomas go to the Economy Minister, Pierre Moscovici to alert him of the threat to the capital of Hermes.
Any sentence of the opponent is peeled and may give rise to claims for defamation. It is July 2012 and the time is not yet warming. Hermès H 51 system is fully operational. But it also shows its limits. Monetization of securities Hermes is not so simple: the volumes are limited by operation. And the treatment is not as fast as a conventional sale on the market. Some family shareholders, who are not parties abroad should also note that the title, because of the speculative premium for the participation of LVMH, is overvalued and that their wealth tax jumped.
At the time of interim results in late August 2013, Patrick Thomas who has for the last time, opens a gap: it asks LVMH to reduce its stake "below 15% would be better," suggests does -there with his characteristic frankness. The message is received in the face. But for now, the criminal case is under investigation while the Commercial Court receives another complaint. Letters rogatory are launched in Switzerland.
"No losers, no winners"
At LVMH , the focus is on changing governance in January Axel Dumas succeeds Patrick Thomas. But requests for appointments are routinely rejected. In early summer Hermes asked the Commercial Court to defer consideration of the complaint and to await the outcome of the criminal proceedings. But the Commercial Court refuses. Initial feedback letters rogatory are meager.
Hermès we realize that the litigation could be very long. Avenue Montaigne, the scenario of an assignment begins to be concocted in late July, with full budget meeting. Bernard Arnault does not usually take a step back, but from the moment he masters the timing and the transaction is financially beneficial to shareholders, you must not hesitate.
Hermes is relieved by the call from Frank Gentin offering mediation but wants to take the time to study the proposal. It mobilizes the office of his lawyer Philippe Ginestié faithful who will be working all weekend on the diagram. The next time a valid topic boards and the various communicating each party agree to a minimum communication on the subject: "no crowing, no loser or winner." Reconciliation between Bernard Arnault and Francois Pinault were made around the dinner table. "We will wait for the ink to dry some agreements," said a relative.