LVMH takes Hermes stake

THE French luxury goods group behind Moet champagne, Hennessy spirits and Louis Vuitton leather goods is buying a €1.45bn (£1.3bn) stake in family controlled handbag maker Hermes, but it denied it was planning a full-blown takeover bid.

LVMH has bought a 14.2 per cent interest in Hermes, which is known for its high-end leather handbags and silk scarves and is among the few luxury companies that have grown throughout the consumer spending slump.

The stake will eventually rise to 17.1 per cent after it has converted certain derivatives of Hermes shares.

The French group said it wanted to be a long-term player in Hermes, although it pledged not to seek to take over the group or to influence its strategy.

“The objective of LVMH is to be a long-term shareholder of Hermes and to contribute to the preservation of the family and French attributes, which are at the heart of the global success of this iconic brand,” LVMH said.

“LVMH fully supports the strategy implemented by the founding family and the management team, who have made the brand one of the jewels of the luxury industry.

“LVMH has no intention of launching a tender offer, taking control of Hermès nor seeking board representation.”

The surprising move is nevertheless likely to trigger questions over the intentions of LVMH’s chief Bernard Arnault. The French businessman took control over LVMH in 1990 after three years of internal power struggle and has often expanded its reach through acquisitions of iconic brands.

● 1993 - About a fifth of Hermes’ capital floated, with rest owned by Dumas family and management.

● May 2010 – Hermes’ charismatic chief Jean-Louis Dumas dies. Later in the year Hermes’ supervisory board head Jerome Guerrand sells 24,257 shares for €4.14m, or 0.02 per cent of capital.

● July 2010 – Hermes posts near-23 per cent surge in first half sales and doubled annual revenue forecast.

● October 2010 – LVMH becomes largest Hermes shareholder after the heirs to the family share of about 70 per cent.