Thursday, 9 December 2010

Fortress of Luxury - Hermès securing its assets

Following the riveting conflict of LVMH taking over 17.1% of Hermès' shares in October 2010, the founding family is bracing itself to preserve its precious heritage.

The extended family of Hermès International - which owns 73.4 of the company - reportedly pooled more than 50 percent of the shares in a holding company. This defence mechanism now depends on regulatory assent.
Within the holding company, a certain part of the future dividends will be put aside and locked up as a security to buy out family members who might want to sell their shares to LVMH.
Despite the fact that none of the family owns more than 5% of the shares - which equals about 0.8 billion euros at current market rates- the clan has profited quite nicely from the LVMH coup.

The market instantly reacted to those precautions: the price of Hermès shares fell by 3.15 percent and settled down at 148.90 euros that very day.
As a result of the common believe after the LVMH buy-in was that Bernard Arnault - CEO of luxury conglomerate LVMH and richest man in France - was about to seize control of Hermès, the artisan brand's shares had risen over 200€ in October 2010.

Bertrand Puech, direct descendant of Thierry Hermès and chair of the management family board at Hermès once more stressed that "LVMH will not be able to take control of the group" and announced that the creation of the holding company was another "demonstration to all those who do not want to believe us. We are a united family, driven by the same spirit of transmitting to our descendants the unique jewel which we have received from our parents."

Let's hope the new fortress wipes away the bitter aftertaste of insecurity and disaccord within the family which might have been stirred up by the peculiar events. And let's also hope that the family members of the Hermès clan did not pull the Trojan horse within its walls.



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