Hermès and LVMH: The Luxury Smackdown


Photo: AFP/Getty Images

An Hermès store in Paris; the luxury retailer is fending off LVMH's takeover attempts.

It isn’t often that the business world is chock-full of compelling fashion drama. But when you have heavyweights like LVMH and Hermès duking it out for the ownership of the latter luxury retailer, things get interesting.

The brouhaha started back in October, when LVMH scored a 17.1 percent stake in the 173-year-old Parisian brand. A flurry of articles, gossip and speculation ensued. What were LVMH’s intentions?

Then, at the end of December, through various maneuvers of equity swaps and tactical derivatives, LVMH announced it owned 20.2 percent of Hermès. Those moves landed the luxury conglomerate under the watchful eye of the French Market Authority (AMF), which, according to WWD, is investigating whether any market rules were violated; LVMH denies it intends a takeover of the brand:

Though LVMH chairman and chief executive officer Bernard Arnault has said he is not seeking full control of the maker of Birkin handbags and silk scarves, Hermès has vowed to protect itself from what the company considers an unwelcome suitor. 

Last week, the Dumas, Puech and Guerrand families of the Hermès clan, who collectively own over 70 percent of the brand, received a boost to their side: The AMF ruled on Thursday that the label was exempt from being bought out by minority stakeholders. A full decision on the matter will be issued by the AMF, but until then, LVMH can’t make any moves. On Friday, AMF issued a detailed statement on the ruling.

The Hermès clan, meanwhile, has gone on the defense. According to Bloomberg News, “members of the family proposed forming a holding company,” which would fend off any LVMH takeover. This move, per AMF rules, requires Hermès to make a mandatory bid for the remaining shares. But the family is calling this maneuver a simple reclassification of its current holdings. Why bother with such a move? According to Bloomberg:

Hermès’s family shareholders need a mechanism to allow them to sell without LVMH swooping [in] on the stock, a person familiar with the matter said. 

What happens next? The AMF has to issue its ruling, which the luxury world awaits with bated breath. The ruling decides whether the Hermès family can buy the remaining shares and if LVMH violated any rules.

In order for the Hermès family to snatch up the rest of its stock, a mandatory tender waiver must be issued, which is not unheard of: In 2009, AMF issued 31 such waivers. Which would mean that Hermès could end up being owned by ... Hermès. 

Plus ça change.