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Friday, January 7, 2011

Hermès Wins a Battle Against Possible LVMH Takeover


The French stock market regulator said Thursday that family members who control the majority stake of Hermès can keep control of the company by pooling their shares into a separate holding company and not have to buy outside shares, according to media reports.

This is being interpreted as a victory for the family members of the Parisian luxury house, who own more than 73 percent of company shares, as it battles against a possible takeover of its company by LVMH. The luxury goods conglomerate headed by Bernard Arnault, France’s richest man, stunned Hermès in October by declaring it had acquired 17.1 percent company through complicated stock swaps. LVMH has since increased its stake to 20.2 percent in December. LVMH has said that it would continue to buy more shares as appropriate but it did not seek control of the company and would not make a public offer.

Autorité des Marches Financiers ruled Thursday that the three branches of the family don’t have to make a full bid for the company’s stock, Bloomberg News reports. The AMF granted 31 waivers on mandatory tender offers in 2009, 22 of which were in similar cases, according to the regulator’s annual report for that year, the most recent information available.

Based on previous statements by the family members, the new holding company will have more than 50 percent of the capital and have first right of refusal on the remaining shares held directly by the family, Bloomberg News reports. The family shareholders need a mechanism to allow them to sell without LVMH swooping on the stock, a person familiar with the matter reportedly said.

The decision by AMF was opposed by Colette Neuville (pictured), head of the Association for the Defense of Minority Shareholders (Adam), a minority shareholders lobby group, who said she was shocked and would appeal against it, the Financial Times reports. The story speculates that LVMH, which refused comment, will most likely appeal the decision.

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