LVMH carving out its territory at Hermès

Could Hermès International one day possibly collaborate peacefully with its most rivalling competitor LVMH Louis Vuitton Moët Hennessy - personified by CEO Bernard Arnault? After fighting out the circumstances of the equity swaps - which resulted in LVMH owning 20.2% shares of the family-owned company publicly, one may doubt so. Despite Bernard Arnault's previous assertions that LVMH's intentions were "peaceful" and of "friendly nature", he recently added in a press conference, that he does not intend to remain a passive shareholder in the company.

Currently, French market regulation is still examining the exact circumstances of the equity swap, which did not only arouse numerous questions within the hereditary family of Hermès but also rose the question of stricter regulations within the French market.
As a consequence to the rather surprising intrusion, the founding family has recently created a holding company, which will enable the family to pool the approximately 70% of shares which remain in its possession and hinder further purchases by external stakeholders.

Despite delivering a more than solid performance in 2010, the LVMH share fell on 4th February after LVMH failed to exceed analysts' expectations. Profits from recurring operations rose by 29% percent to 4.32 billion euros in 2010. The revenue of Louis Vuitton brand drove the profit, with its raised prices and new product lines like the "Monogram Empreinte" collection. LVMH is surely relying on China's growing appetite for luxury within the next years.

The year ahead will surely give direction to the "battle" between Hermès and LVMH and their nip-and-tuck-race in consumer favour.

xoxo
Glamazone


Source: www.bloomberg.com, www.businessweek.com
Picture Source: www.be.com

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.

xoxo
Glamazone


Source: reuters.com, fashionmag.com, ftd.com

Hermès throws down the gauntlet to LVMH

What a sight for sore eyes in today's Le Figaro business section: "Hermès repousse LVMH" - Hermès fights back.

Ten days after the rather surprising and sudden announcement that LVMH had at last managed to buy its way in on his competitor, French artisanry maison Hermès, the gloves between the two competitors - or the shock waves that shook the industry- are off.

Despite a statement of Louis Vuitton Moët Hennessy that there are no current intentions of making an official offer or taking over the Hermès Group though to become a long-term investor, the article published today suggests that this coup was not as amicable and friendly as it was presented at first glance.

Heir Betrand Puech - direct descendant of the founder Thierry Hermès, who in 1837 established Hermès, and CEO Patrick Thomas insist in today's in Le Figaro that the purchase of 17.1% of Hermès shares was an unwanted, undesired and stealth action of Monsieur Bernard Arnault and his conglomerate. 72% of the remaining shares are dispersed within the family.
The duo also point out that the maison clearly was not in need of any capital support, mentoring, guidance or whatsoever from LVMH, as its financial performance has been showing a steady healthy growth since 1993. Hermès' performance was particularly strong during the last year, where many high-end fashion and luxury companies struggled significantly. In the interview, Patrick Thomas goes to such lenghts as to publicly doubt the correctness of the incident and calls the business transactions that have happened end of October 2010 more than just a little strange and even dubious - refering to LVMH business branches in Panama that were involved in the hostile buy into the company.

According to WWD, the French market regulator (AMF) is currently examining the circumstances purchase of the 17.1% shares

To the declaration that the buy-in was of amicable nature, Patrick Thomas and Bertrand Puech reacted indignantly with the response: "If you want to be amicable, Monsieur Arnault, you have to withdraw." - for the sake of completeness, one has to mention at this point that in a phone conversation following the buy-in, Monsieur Arnault had even stated that he does not even claim a seat on the board of Hermès International.

A conspicuous uproar of the last insurgent standing up against being locked in the golden cage of LVMH - after all, "'C'est n'est pas un combat financier, c'est un combat de cultures." Seems like front men Patrick Thomas and Betrand Puech will stop at nothing to impede Hermès International becoming the Koh-i-Noor in Monsieur Arnault's LVMH crown jewels.


xoxo
Glamazone



Source: lefigaro.com, WWD.com
Picture Source: magazine.wsj.com, lefigaro.fr