This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

LVMH, Hermes Strike Peace Deal

PARIS ( The Deal) -- France's Hermes International has won its long battle to rid itself of LVMH Moet-Hennessy Louis Vuitton after France's largest luxury goods group agreed to hand its shareholders a 23.1% stake in the scarves and handbags maker.

The deal, which was announced Wednesday will bring to an end legal action by both parties related to LVMH's holding, which Hermes had claimed was unlawfully built because LVMH used derivatives to circumvent disclosure rules.

"LVMH Group will distribute all its Hermes shares to its shareholders, on the understanding that LVMH's largest shareholder, Christian Dior will in turn distribute the Hermes shares it receives to its own shareholders," said Paris-based LVMH. "By virtue of the agreement ... LVMH and Hermes have brought to an end the conflict, and all related actions, between them."

The agreement, which encompasses about 6 billion euros ($7.9 billion) worth of shares, will not completely rid Hermes of an interloper that former CEO Patrick Thomas likened to a "stranger in the family garden." Group Arnault, the holding company of LVMH Chairman and CEO Bernard Arnault, will gain an 8.5% stake in Hermes as a result of the distribution.

LVMH, its biggest shareholder Christian Dior and Arnault all agreed not to buy shares in Hermes for at least five years. Dior, which is controlled by Arnault, in turn owns just over 42% of LVMH.

"This will create an overhang in Hermes shares as there are going to be lots of LVMH and Christian Dior shareholders moving the stock on soon after they get it," said a Paris-based fund manager who asked not to be named. "It also removes the takeover speculation."

LVMH said it expected to complete the distribution of its Hermes shares by Dec. 20

LVMH in October 2010 stunned family controlled Hermes and regulators when it announced that it owned just over 17% of its smaller rival. LVMH's Arnault insisted that the holding was friendly, but he failed to soothe the concerns of Hermes controlling family. They hurriedly established a holding company that locked in a 50.2% stake in the Birkin bag maker and launched legal action to force LVMH to sell its stake.

LVMH, which later increased its stake in Hermes to 23.1%, also fell foul of regulators. It was fined 8 million euros for failing to disclose its stake building. LVMH would normally have needed to declare its holding once it passed 5%, but used swap deals with three banks, each of which held less than 5% in Hermes, to avoid revealing its holding. The maneuver was ruled to have broken the spirit, though not the letter, of the law and led to a re-writing of French disclosure rules to close the loophole.

Hermes in June 2013 filed a suit asking a Paris commercial court to annul the acquisition of the initial 17.1% stake, describing it as "the biggest fraud" in French stock market history. That came on top of earlier filings alleging criminal insider trading by LVMH. LVMH countersued for slander and sought compensation for "serious harm" caused by Hermes' "baseless legal proceedings."

Peace broke out after the president of the Commercial Court of Paris, where at least some of the cases were due to be heard, proposed the solution agreed by the two companies.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,055.87 -116.81 -0.68%
S&P 500 1,982.77 -11.52 -0.58%
NASDAQ 4,508.6880 -19.0010 -0.42%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs