Hermès Ask LVMH to Withdraw Their Stake in Luxury Family Company {Fragrance News}

In the latest installment of what looks like a typical takeover pattern designed by Bernard Arnault of LVMH, the largest luxury company in the world, company Hermès founded in 1837 is attempting to defend the penetration of LVMH capital into the family company as it learned that LVMH now owns 17,1% of its stakes.

In the perfume business, Guerlain is a case in point of this type of gradual appropriation by the giant luxury goods company as a minority stake bought in the 1980s evolved into a full takeover in 1994 while the Guerlain family remained divided about this evolution. Observers have not failed to note a drive towards constructing Guerlain fragrances as high luxury items sometimes stratospherically priced as far as perfumes go, while encouraging commercial tastes although not all sense of quality and artistry has been lost. Hermès family members claim that the culture of their artisan-oriented company which centers more on the notion of "quality" than that of "luxury" would inevitably clash with and ultimately die at the hands of LVMH as the latter would put emphasis on profit-seeking...

The announcement of this new LVMH stake was made initially in October 2010 as if Hermès were welcoming the move and amidst reassurances made by Bernard Arnault that he would not seek to become a board member. The stake was quickly brought from 14,2 % to 17,1%, which now makes LVMH the second biggest stake holder at Hermès.The official reasoning went for LVMH that they would support the Hermès family strategies keeping the company French while protecting it from a potential Chinese takeover which apparently is not a main concern at this point.

It turns out that Hermès are actually asking Arnault to withdraw if indeed he means any friendship towards them. The French government is currently looking at the revision of its legislation to avoid this type of lack of controls on ownership threshholds which occurred thanks to loopholes allowing LVMH to discreetly buy stakes with cash through intermediaries in Switzerland but also Panama.

Sources: LVMH prend 17% du capital d'Hermès; L'entrée de LVMH chez Hermès n'a rien d'amical; Hermès Heirs put Safety in Numbers