Hermes rejects LVMH foray, luxury battle in offing

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Hermes rejected on Wednesday "an attack" on its capital by luxury goods giant LVMH, sounding the start of what could become a bitter battle for control of one of France's most iconic brands.

The head of LVMH, Bernard Arnault announced he had bought 17 percent of his rival Hermes, insisting that this does not herald a hostile takeover but that he simply wanted to become a "friendly" long-term shareholder.

"If you want to be friendly, Mr Arnault, you should withdraw," retorted Hermes executives Bertrand Puech and Patrick Thomas, in an interview with Wednesday's edition of French daily Le Figaro.

The pair alleged Arnault's tactics in taking the stake were questionable and said they hoped the financial services watchdog would investigate.

"This entry has nothing friendly about it. It was neither wanted nor asked for," said Thomas, as Puech complained that he had had barely one hours notice from Arnault before LVMH released a statement confirming its purchase.

"When you look at the structures that allowed this attack to take place, we see that they are LVMH subsidiaries based in Luxembourg, the United States and Panama, which is not the most transparent country," Thomas said.

Both executives said that Arnault's move would do nothing to change the culture at Hermes, and noted that he had not asked for a seat on the board.

"We're artisans, our goal is to make the best products in the world. We're not in luxury, we're in quality," Puech told Le Figaro.

Puech is a fifth-generation heir of Hermes' founder Emile Hermes, while Thomas is the family owned firm's manager. Family members still control the 73 percent of the firm not in LVMH chief executive and chairman Arnault's hands.

LVMH, or Louis-Vuitton Moet Hennessy, is a French holding company and the world's largest luxury goods group, specialising in wines and spirits, fashion and leather goods, perfumes, watches and jewelry.

It owns more than 50 global brands, including marques such as Christian Dior perfumes, Glenmorangie whisky, Givenchy fashion and TAG Hauer watches.

The group made a 1.1-billion-euro (1.5-billion-dollar) profit in the first quarter, up 53 percent on the year with sales up 16 percent to nine billion.

Hermes is a French fashion house that has branched into perfume and luxury goods. Smaller than LVMH, it nonetheless also saw profits up 55 percent in the first quarter, on sales of 1.07 billion euros.

The luxury goods industry has seen much consolidation in recent years, and there has been speculation about the fate of Hermes since the death in May of its charismatic former manager Jean-Louis Dumas.

Asked whether other family members might be tempted to sell their stakes in the firm, now that speculation over a hostile bid had pushed the shares to record levels, Puech insisted Hermes remained a better long-term bet.

"Sell up in order to invest in what?" he asked. "We know what's best, and that's Hermes. The shares were worth five euros when they came onto the market, they were worth 200 euros by last week."

© 2010 AFP

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