PARIS — LVMH Moët Hennessy Louis Vuitton and Hermès International have called a truce.
The two French companies, which have locked horns and traded barbs and lawsuits over LVMH's creeping 23.1 percent stake in Hermès, said they agreed to a conciliation brokered by the Commercial Court of Paris.
The news sent Hermès shares down 6.1 percent in mid-morning trading on the Paris Bourse, while LVMH gained 3.3 percent.
LVMH said the two parties signed an agreement that will see LVMH "distribute all its Hermès shares to its shareholders, on the understanding that LVMH's largest shareholder, Christian Dior will in turn distribute the Hermès shares it receives to its own shareholders."
Further, LVMH, Dior and Groupe Arnault — companies controlled by luxury titan Bernard Arnault — have agreed not to acquire any shares in Hermès for the next five years.
According to a statement, the distribution of Hermès shares, subject to board approval at LVMH and Dior, is to be completed no later than Dec. 20. At that time, Groupe Arnault will own around 8.5 percent of the capital of Hermès International.
The truce also puts to an end to "all related actions" between the two companies, alluding to a series of defamation claims and charges by Hermès that LVMH's stake building was illegal.
The statement said Hermès chief executive Axel Dumas and Mr. Bernard Arnault "both express their satisfaction that relations between the two groups, representatives of France's savoir-faire, have now been restored."
In 2013, France’s stock market regular AMF slapped LVMH with sanctions over the way the luxury conglomerate amassed its initial 17.1 percent stake in Hermes. AMF had ordered LVMH to pay 8 million euros, or $10.6 million at current exchange, the largest fine it has ever imposed.
But signaling a possible denouement in a long festering battle, LVMH said a year ago it would not appeal the AMF sanctions, even if it felt it would be justified in appealing the decision, arguing it never breached regulations regarding ownership thresholds or engaged in insider trading or market manipulation.
Hermès executives had repeatedly urged LVMH to reduce its shareholding, and constructed defenses against a full takeover of the family-controlled firm.
LVMH surprised markets in October 2010, revealing it had amassed a large stake in Hermès via cash-settled equity swaps that allowed it to circumvent the usual regulations requiring firms to declare share purchases.