Illegal transactions or not?
LVMH currently owns 22.6 percent of the shares
of Hermès, but it largely acquired them in silence. According to Hermès this
happened through illegal transactions and through manipulating the market
price.
LVMH surprised its competitor in October 2010 by
announcing it had built a stake of 14 percent in the
company. This happened through ‘derived products’, that did not have to be
reported to market authorities, according to LVMH: it did not concern the stock
themselves. In France it is an obligation to report when the
participation threshold of 5 percent in a publicly traded company is exceeded.
The direct investment in shares stayed just under the
reporting threshold of 5 percent until 2010, and it was only when LVMH turned the derived products into
shares, it reported them. The AMF does not follow the reasoning of LVMH
and says LVMH kept its position in Hermès hidden for too long. That is why the
researchers are asking for the maximum penalty of 10 million euro.
Hermès protects itself from hostile takeover by
LVMH
The target Hermès is not interested in a bigger
influence of LVMH and has put a construction for protection in place, to avoid
that its French rival would increase its stake. Hermès also contests the
acquirement of the participation in another proceedings, fearing LVMH and
its CEO Bernard Arnault are working towards a takeover – although Arnault says it is only a
long-term investment.
Hermès is largely owned by the families Puech,
Dumas and Guerrand, who group more than 75 direct descendants of
founder Emile Hermès. A part of the shares bought by LVMH did however come from
the family Puech, showing not everything is running smoothly between the
families.
In a few weeks the sanction committee of the
AMF will decide on the matter. An attempt of LVMH to have the complaint deemed inadmissible,
was declined by the AMF.
