LVMH The Story Behind "Hermes"

This news almost shocked everyone. Although LVMH Group Chairman Bernard Arnott (Bernard Arnault) coveted Hermes is almost known, he has repeatedly suggested in the past two years that he intends to acquire Hermes. However, this family business with a history of more than 170 years has repeatedly stated its position to maintain the independence of the family industry.

Moreover, even in the economic crisis, Hermes is one of the few luxury brands that have maintained strong performance growth, and no reason to see any change or sale of shares.

The announcement was made on Saturday.

Even more shocking is the price.

According to the figures disclosed by LVMH, the 17.1% share is about 18 million 20 thousand shares, which cost about 1 billion 450 million euros, and the price per share is about 80.5 euros.

This year, the average price of Hermes is about 100 euros. The day before the takeover, it closed at 176 euros in the Paris stock market.

This means that the purchase price of LVMH is almost half of the current market price.

No one knows where such a large share has come from.

This is certainly not a blitz.

As a Limited Partnership On shares (a company consisting of unlimited liability shareholders and limited liability shareholders), most of the shares of Hermes are in the hands of family members, and other shares were listed in Paris in 1993.

The Hermes family initially indicated that no family member had ever sold shares in the paction.

It was subsequently corrected that some family members had made small pactions, but no one had sold large shares. It is said that LVMH has gained about 6% of the shares in this way.

It is speculated that a share of the stock may have been acquired in the form of options in March last year, and then converted into shares. At that time, Hermes's share price was almost 80 euros.

Citigroup analyst Thomas Chauvet said, "in our view, March 2009 is probably the most likely time and opportunity to buy"; at that time, Arnott accepted the Wall Street journal's WSJ Magazine magazine, saying it would buy more companies in the next 6 to 8 months.

The rest is a portion of Hermes stock held by LVMH, but it cleverly controls the proportion below 5%. According to the French regulation, only when investors hold more than 5% of the shares of listed companies will they need to disclose publicly. If the shareholding reaches 10%, they must show the intention of purchase and be supervised by the French market regulator AMF.

According to the statement issued by LVMH, the goal of the acquisition is "to become a long-term shareholder of Hermes". LVMH has no intention of offering a takeover offer to Hermes or controlling the company or seeking board seats. It also expresses its full support for the Hermes family and management level, and contributes to the preservation of Hermes' "family and French characteristics".

Obviously no one believes this.

Luca LVMH, an analyst at Sanford C. Bernstein investment research company in London, commented that "LVMH is just waiting for the opportunity to move. It has now seized the inner lane of the runway and will take Hermes at one stroke as soon as the time is up."

This secret takeover is easy to remind people of the foundation of LVMH's huge luxury empire. In the summer of 1987, MOET & CHANDON, Hennessy, the largest liquor company in France, merged with Louis Weedon Louis Vuitton (Louis Vuitton) to set up LVMH group, but the two sides immediately fell into a war of control.

Louis Weedon and Arnott formed an alliance, hoping to suppress MOET & CHANDON Hennessy, while Arnott took the opportunity to acquire LVMH 45% shares.

When MOET & CHANDON Hennessy boss Alain Chevalier resigned in January 1989 and Arnott became chairman of LVMH's board of directors, Louis Weedon found it too late.

People still remember that when buying the 5% stake in GUCCI group in 1999, Arnott just said the same thing and increased the shareholding of Gucci to 34% in one month.

Market participants began to calculate how much money LVMH needed to buy Hermes and how to raise money at the very beginning.

Even the liquor giant, Diageo, seems to think so. In October 25th, it announced its intention to acquire MOET & CHANDON Hennessy, which is believed to have raised about 10000000000 euros for LVMH to help acquire the remaining shares of Hermes.

This is obviously not good news for Hermes.

After a brief rise, Hermes's share price plunged 13% in October 26th, the biggest single day decline since its launch in 1993.

Hermes shares continued to decline, and the lowest level fell to 153 euros in October 29th.

Hermes's share price rose nearly 80% in just a few months after the fifth generations of the Hermes family and former chairman Jean-Louis Dumas died in May 1st.

Jean-Louis Dumas has been in charge of Hermes for 28 years. Under his leadership, the family business has grown into the most high-end and best known luxury brand in the world.

His death prompted speculation that Hermes family members would sell shares, which helped to boost share prices to a certain extent.

Now the more than 40 members of the Hermes family control 72% of the stock, and there are always some people in the huge family who want to cash in. After all, 0.1% of the Hermes shares are worth 18 million euros, and the family brand or honor may not be so attractive to every N generation member.

The Hermes family said that LVMH's "unsolicited" stake prompted the whole family to join hands and unanimously agreed to ensure long-term control of the company.

After a series of changes, Hermes may need this kind of solidarity especially. Just two weeks after the death of Jean-Louis Dumas, Jean Paul Gaultier, who had been recruited to his command and set up a classic style design director for Hermes, announced that she would leave her job. The successor was Christophe Lemaire, the design director of Lacoste, which changed many people.

But the new brand "top and bottom" launched by Hermes in China was opened in Shanghai in September 16th. It seems to some people that this is a compromise to fight for China's huge market.

In the face of Arnott's rivals, they should be more alert.

Although Hermes claims that the company has anti takeover strategies and numerous "poison pill" plans, let's take a look at GUCCI. Although Arnott's acquisition ended in failure, the GUCCI acquired by PPR group also lost its independence.

Anyway, for Hermes, the good days of low-key and quiet enjoyment of fast growth may end.

For LVMH, even if this investment really stops here, it is also a business that the bag can earn.

In addition to the surpluses of more than a billion euros that have been harvested, Hermes can do much more for LVMH.

According to Deutsche Bank and other research institutions, 55% of LVMH group's profits come from Louis Weedon, and other leather brands such as Fendi, Loewe and Celine have been dragging the back of LVMH for many years, and buying Hermes can no doubt alleviate its dependence on Louis Weedon.

More importantly, when nearly 30% of the shares are scattered outside investors in the Hermes family, rivals such as Richemont are likely to take the lead one step at a time. Arnott has blocked them at Hermes at least in this way.