LVMH and Hermès call truce on spat

A truce has been called on the biggest spat in luxury goods, involving French giant LVMH and its 23.2% stake in a rival.

France’s Hermès (known for its expensive handbags and silk scarves), and LVMH, run by France’s richest man, Bernard Arnault, have settled a four-year dispute — involving lawsuits and personal attacks — which erupted after LVMH secretly built up the stake in the family-run maker of Birkin handbags.

Now, after conciliation talks brokered by the Commercial Court of Paris, Arnault has agreed to distribute the stake to shareholders in LVMH, Christian Dior and the Arnault family investment firm Groupe Arnault.

The deal, to take place in December, will leave Groupe Arnault controlling only 8.5% of Hermès shares – dashing Arnault’s plan to take it over, for now.

With hopes of a takeover gone – and Arnault’s side promising to not buy any more shares in Hermès for the next five years - Hermès shares tumbled 6%.

Arnault, known as the wolf in the cashmere coat for his shrewd business dealings, will have helped LVMH investors make a profit of around €3 billion from the deal.

The windfall helped LVMH shares jump 3%.

Arnault and his family investment arm Groupe Arnault will be one of the main beneficiaries of the share distribution – likely to be through a special dividend. Through his complex share ownerships he controls around a third of LVMH. Groupe Arnault controls 70.5% of Christian Dior which in turn controls 41% of LVMH.

The deal will also mean the liquidity of Hermès will improve by the end of the year.

Analysts said that although the agreement is a blow to any near-term takeover, the move by Arnault shows he is a pragmatic businessman as a long running court case would have been bad for his image. LVMH was already fined €8 million by France's markets watchdog AMF last year for the secret stake-building.

The LVMH shareholding was a shock to the Hermès family when it was revealed in 2010 and then-chief executive Patrick Thomas criticised Arnault’s tactics and said: "If you want to seduce a beautiful woman, you don't start by raping her from behind.”

A statement today, issued by LVMH, said Hermès chief executive Axel Dumas, who last year took over from Thomas, and Arnault both expressed their “satisfaction that relations between the two groups, representatives of France’s savoir-faire, have now been restored.”