LVMH buying over Hermes??!

Wednesday 27 October 2010

LVMH closes in on 17pc stake in Hermes
LVMH, the luxury goods conglomerate, is finalising the purchase of a 17.1pc stake in Hermès at a 50pc discount, in a move likely to increase speculation it will sell its champagne business to Diageo to fund a full takeover.

LVMH denied, however, that buying the stake was the start of a takeover battle for its French rival, saying it wanted to hold a minority stake.
The Sunday Telegraph understands that the company was directly offered a block of 15m shares, equivalent to 14.2pc of Hermès, on Friday, with the deal finalised early on Saturday. No banks are thought to have been involved.

The identity of the seller – or sellers – was, however, on Saturday shrouded in mystery, as speculation centred on a dissident member of the Hermès founding family, which together holds a 70pc controlling stake. Although it is possible the shares may have been bought on the open market, given the sheer scale of the transaction, and the size of the discount, a distressed seller is thought more likely.
LVMH also admitted for the first time on Saturday that it owns 3m derivative options – thought to have been built up in the past two years – which it plans to turn into Hermès shares. Such a move is expected in the coming days. LVMH stake would then be 17.1pc of the company. In a statement, LVMH said the total cost of the 17.1pc holding was €1.45bn (£1.3bn), booking an immediate €1.2bn gain on the transaction, given the €2.65bn value of the stake based on Hermès' closing price of €176.2 on Friday night. LVMH will pay for the stake in cash from continuing operations.
The overall discount is thought to have been achieved through the forward options, allowing LVMH to reduce the average value of the price paid per Hermès share. Full details of the transaction – and the identity of the seller(s) – are set to be filed with the French financial regulator, the AMF, by Wednesday.

Shares in Hermès, famous for its Birkin bags carried by celebrities including Victoria Beckham and actress Katie Holmes, have climbed more than 75pc in the last six months.
"The objective of LVMH is to be a long-term shareholder of Hermès 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," the company said. "LVMH fully supports the strategy implemented by the founding family and the management team. LVMH has no intention of launching a tender offer, taking control of Hermès nor seeking board representation. "Hermès has a market value of €18.6bn (£16.5bn) - whose controlling family stake would preclude a hostile takeover attempt – while LVMH is worth €55.5bn.


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