French court frees Hermes family to fight LVMH takeover
The family controlling luxury goods house Hermes does not have to buy up the outstanding shares in the company as they fight off giant rival LVMH, a French appeal court ruled Thursday.
The descendants of founder Thierry Hermes were prompted to set up a holding company structure to thwart an eventual LVMH takeover after the global luxury retailer last year increased its stake in Hermes to more than 20 percent.
In changing the group structure, however, the family members, who collectively hold more than 73 percent of Hermes, had laid themselves open to a possible obligation to buy out all minority shareholders.
The holding company is intended to control over 50 percent of Hermes and so block a hostile takeover but under French rules, any shareholder acquiring more than 33 percent of a listed company must offer to buy the other shares.
The AMF markets regulator said in January it had decided not to enforce this requirement, prompting small shareholders' association Adam to launch an appeal, which was rejected on Thursday.
The minority shareholders association argued that the fact most owners of a company belong to a family should not allow them to escape their legal obligations to other shareholders when transforming into a group.
Minority shareholders can benefit from a contested takeover as the bidder or bidders will likely increase the price paid in order to overcome the target company's opposition.
LVMH said when it hiked its Hermes stake to 20.2 percent that it would continue to buy more shares as appropriate but it did not seek control of the company and nor would it make a public offer.
The group, owned by French billionaire Bernard Arnault, said the investment in Hermes was "strategic and long-term."
LVMH, the world's leading luxury group, controls brands such as Louis Vuitton, Givenchy, Dom Perignon and Dior.
LVMH today controls 21.4 percent of Hermes' capital. Trading in Hermes shares was suspended pending the appeals court decision and is set to resume on Friday. Its shares closed up 2.48 percent at 268.30 euros on Wednesday.
© 2011 AFP