The founder, chairman and CEO of Moët Hennessy Louis Vuitton , Monsieur Bernard Arnault announced to own 20.2 percent of Her
mès shares on December 21st (The Economist Newspaper Limited, 2010). This is not the first time he picked a fight with famous brands owners in his journey to create the biggest luxury group. Not satisfied with the ownership of Louis Vuitton, Dior Couture, Fendi Handbags and Hublot watch, including the bitter failure in taking over Gucci, the 61 year old Arnault is now ready to be the richest person in France by also embracing the Paris based silk scarves maker.
This LVMH-Hermès handbag war, the way the French press calls it, was first started three months ago. On October 23rd, LVMH announced that it has increased its holdings from 14.2 percent to 17.1 percent of Hermès shares worth of 2 billion dollars. The acquisition in which some of the deals were settled through equity swap, LVMH claimed that this action is just a part of its long-term investment (Wall Street Journal, 2010). It also told Autorite des Marches Financiers that LVMH doesn’t intend in launching a tender offer, taking control or seeking board representation of Hermès International. Analysts aren’t convinced (Bloomberg, 2010).
Fly back to 1999, Arnault was quite a headline together with his archival, Monsieur François Pinault in acquiring Gucci (BBC, 2010). Arnault said that he had no intention to make a full bid of Gucci, while no long after that he announced that he has raised his stake in Gucci from 5 percent to 34 percent just in a month, continuing with a hostile bid. The handbag war ended with Arnault losing the bid to Pinault who runs PPR Group specializing in luxury brands including Yves Saint Laurent and Bottega Veneta (The Economist Newspaper Limited, 2010).
The press is questioning how LVMH could pile up such a large stake in Hermès whose stock is mainly held by the founding family members. LVMH also said that it had acquired its Hermes holdings at an average price of 80.5 Euros a share, or a 54 percent discount to Hermes' closing share price prior to the announcement, raising questions as to how it had secured such a price (Thomson Reuters, 2010). If Arnault was willing to sell back its stake right away after the buyout, he would have made a significant gain of 1.7 billion Euros from his investment in Hermès in which Hermes was valued at 176 Euros per share.
With his business culture and strategy that has made him listed as the world’s 15th richest person in 2009 by Forbes Magazine with a net worth of 16.5 billion dollar, Arnault is putting a lot of pressure on the fifth generation family members aged around 65-75 to delist Hermès from stock market. Analysts speculate that he might position LVMH for the succession of the maison’s sixth generation.
