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LVMH vs. HERMES

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Feud far from over....

Text of LVMH vs. HERMES

  • 1. Luxury Takeover? 2011 MBA

2. The players LVMH Moet Hennessy Louis Vuitton SA Mr. Bernard Arnault, Chairman & CEO - 2010 Revenues: 20.32 billion (+19%) - 2010 Net Profit: 3.03 billion (+73%) - Dec 31st, 2010 Market Capitalization: 60.33 billion Herms International SCA Mr. Patrick Thomas, CEO 2009 Revenues: 1.91 billion (+25% expected in 2010) 2009 Net Income: 288.8 million #Shares Outstanding : 105.57 million Shares traded above 100 in 2010, +88% in 4th quarter (closing 176.20, 31st Dec) 3. October 2010: LVMH declares.. to be a long-term shareholder and not taking control of Hermes nor seek board representation. We are peaceful investor, which doesnt mean we will be passivewe can team up to bring benefits LVMH already had a long-standing direct stake in Herms amounting to 4.92% (below 5% disclosure threshold required by AMF Autorit Marchs Financiers) On October 2010 LVMH closed derivative transactions for 12.85m Herms shares, that brought his stake in Herms to 17.1% (10.7% of the voting rights), paying only an average price of 80.50 per share 4. Herms reaction In France, must declare when a company reaches 5%, 10%, 15% threshold in entering the capital of another companyWhy did LVMH not declare? Meeting among Herms family members, giving Management the authority to investigate ways to prevent LVMH from increasing the stake Call from Bertrand Puech (Chairman and member of Hermes) to Mr. Arnault Withdraw from Herms! Herms - Talks to bankers and lawyers to prevent invasion and expansion of LVMH 5. Why did LVMH not declare his stake in Herms? Mr. Arnault meets Bankers Socit Gnrale, Crdit Agricole, Natixis 2007-2008 6. Equity Swaps is the answer Equity swaps enable an investor to bet on the value of a stock without actually owning the shares An investor typically enters such a swap arrangement with a bank in return for a fee To hedge its position, the bank will often buy and hold the underlying stock Because these options were settled in cash, under AMF rules, they do not have to be declared Equity Swap transactions will be registered to five LVMH subsidiaries based in Panama and Luxemburg 7. Herms proposal for action Mr. Thomas meets the Shareholders December 2010 8. Herms family controls 73% of the company and is determined to remain independent Reinforce the defense through creation of a separate family Holding Company comprising more than 50% of Herms International The Holding Company would oblige the family to make an offer for the whole company unless exempted by AMF Right of refusal on share sales by family members Herms debates DECEMBER 2010 9. Shares fell 1.9% after your announcement LVMHs swoop has already cut the free float from about 25% to less than 10%, which implies its share price movements will be volatile Liquidity in the stock has already been reduced following LVMHs stake-building and would be further reduced. Were the family to agree to sell to one another!? Hermes put its company into the stock market and knows the rules of the game! It is not up to them to choose their shareholders! I should get a liquidity premium to accept that! Liquidity! Liquidity, Liquidity!!! Scary Facts Shareholder 10. Herms adds tactic against LVMH Mr. Thomas January 2011 11. Herms vs. LVMH Herms bolsters LVMH defenses: - Go ahead by AMF to create family holding without having to buy-out minority investors Minority shareholders upset appealed against it Herms management members have said year after year that no single shareholder controlled the company Cannot say they controlled the capital Herms proposes an interim dividend of 1/share, to be paid out of net cash of 830 million (31st Dec, 2010) 12. Will Herms be able to completely control the intrusion? Will it be able to resolve the issue with minority shareholders?

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