Analysis: Arnault spooks Hermes into long arms of the law

Fri Sep 7, 2012 4:59am EDT
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By Christian Plumb and Dominique Vidalon

PARIS (Reuters) - Calling in the law is an unorthodox takeover defense, and it shows just how much luxury goods maker Hermes fears Bernard Arnault, France's richest man, and his reputation for exploiting internal dissent to get what he wants.

Hermes, a highly profitable maker of 10,000 euro handbags women wait months for, had already formed a laager of family shareholders to keep Arnault and his LVMH luxury goods group at bay, and on Tuesday called in the cavalry, asking prosecutors to investigate him for insider trading and share manipulation.

The family shareholders set up a majority holding group after Arnault surprised them all by disclosing in 2010 that he had built up a 17 percent stake in the 175-year-old firm, one of the last independent luxury houses.

Arnault, who spent 1.45 billion euros ($1.83 billion) on his initial purchase, has since raised his Hermes stake to 22.3 percent while insisting he does not plan to buy the company.

Hermes family shareholders - The Puechs, Guerrands and Dumas - don't appear to believe him.

"This new litigation, it's another way of showing that the group will defend itself against someone who is tenacious and not so friendly," an Hermes source said.

There is no evidence that Arnault is exploiting rivalries or dissent between Hermes family members, who own 73 percent of the company. But some family shareholders, including Nicolas Puech, the biggest, with 6 percent, did not participate in the creation of the family holding, which controls 50.2 percent of Hermes equity.

That leaves cracks that could become dangerous fissures.   Continued...

LVMH Chief Executive Bernard Arnault arrives for a news conference to present the group's 2010 results in Paris February 4, 2011. REUTERS/Gonzalo Fuentes