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2013 May 20

LVMH's Mercurial Designs On Hermès

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Bernard Arnault Bernard Arnault
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(NEW YORK) Fashion conglomerate LVMH has been in heated legal battles with French luxury company Hermès, as the family-run company struggles to maintain control over its coveted brand. Despite the family not wanting to sell the company to LVMH, which has long considered Hermès to be a competitor, Bernard Arnault's LVMH has slowly built up a 22.6 percent stake in the luxury leather-goods company, making it Hermès' largest shareholder.

After a report in French newspaper Le Monde detailed the murky ways in which LVMH came to hold such a large percentage of the company, Arnault was in the hot seat. The reason? The newspaper had leaked a 115-page report conducted by French market authority AMF, which accuses the company of building its stake through tax haven subsidiaries dating back as far as 2001. The code name "Mercure" was used as a front for the investment operation. The primary problem: LVMH was accumulating their stake below mandatory disclosure thresholds for a public company. 

According to Le Monde, last month Arnault spoke before a general assembly claiming to not have foreseen that LVMH would become the largest shareholder in Hermès. Thus, Arnault claims the financial investments unfolded unpredictably. As for the non-LVMH-owned shares, Dumas, Puech, and Guerrand families collectively own 70 percent of Hermès International, under an investment structure built to protect the brand from companies like LVMH. Even in the world of luxury, exclusivity (and truly family-owned businesses) has become increasingly elusive, non?

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