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Wednesday, July 27, 2011

LVMH Increases Stake in Hermès

LVMH continues to slowly add to its ownership of Hermès International saying it now owns 21.4 percent of the Parisian luxury jewelry house, up from 20.2 percent. Company representatives made the announcement Tuesday during LVMH's half-year earnings report conference call with investors and journalists.

Bernard Arnault
In October 2010, LVMH shocked the luxury and investment industries and enraged the family that owns Hermès by announcing that it bought a 14 percent stake in the firm in a complex derivatives trade that occurred years earlier without public knowledge and resulted in the purchase of the shares at less than half of the market value. Bernard Arnault, LVMH chairman and CEO, said at the time LVMH would continue to buy more shares but did not intend to take control, to make a public offer for the company nor to seek seats on the board.

Two months later LVMH announced that it has increased its holdings on Hermès to 20.2 percent. During this time descendants of Hermès founder Thierry Hermes, who between them hold 73.4 percent of the company's capital, first demanded that LVMH sell its shares then took the unusual step of pooling their shares into a separate holding company. In January, they received the approval of the French stock market regulator to do this. Based on previous statements by the family members in published reports, 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.

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