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Gucci-LVMH Takeover Battlement

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Group Members: KOK KEAN TEONG MOH JIA WEI NEO CHING HUP ONG KAH HOEY TEO SILK KEONG

Text of Gucci-LVMH Takeover Battlement

  • 1. CAEA 3231CAEA 3231 Integrated Case StudyIntegrated Case Study Group Members: KOK KEAN TEONG CEA070059 MOH JIA WEI CEA070084 NEO CHING HUP CEA070109 ONG KAH HOEY CEA070157 TEO SILK KEONG CEA070197

2. The Battle of TakeoverThe Battle of Takeover 3. Introduction of TakeoverIntroduction of Takeover 4. Friendly TakeoverFriendly Takeover 5. Hostile TakeoverHostile Takeover 6. Hostile TakeoverHostile Takeover 7. Procedures Involved in TakeoverProcedures Involved in Takeover 8. Hostile Takeover DefenseHostile Takeover Defense StrategiesStrategies 9. IntroductionIntroduction Gucci Group NV (Target Company) Italian company Incorporated in Netherland Sells French Fashions CEO: Prior 2004> Mr. Domenico De Sole 2004 until now>Mr. Robert Polet Stocks traded on NYSE and Amsterdam Stock Exchange 10. IntroductionIntroduction LVMH Moet Hennessy Louis Vuitton SA (Attacker) World largest luxury group French company Incorporated in Paris Sells French Fashions CEO: Mr. Bernard Anault Stocks traded on Nasdaq Stock Market Trading and Paris Stock Exchange 11. IntroductionIntroduction PPR-Pinault Printemps Redoute SA ( White Knight) World 3rd largest luxury group French company Incorporated in Paris Europe largest non food retail group CEO: Mr. Francois Pinault Stocks traded on Paris Stock Exchange 12. History: 1923-1989History: 1923-1989 1923- 1953 13. History: 1989-1995History: 1989-1995 50% 50% 1993 1995- Go Public 14. The Start of the Battle (1999)The Start of the Battle (1999) 15. The Start of the Battle (1999)The Start of the Battle (1999) 16. Ways to amass 34.4% of stakeWays to amass 34.4% of stake 17. The Start of the Battle (1999)The Start of the Battle (1999) 18. The Difference RegulationsThe Difference Regulations between Countriesbetween Countries 19. The Start of the Battle (1999)The Start of the Battle (1999) 20. Analysts ViewAnalysts View Reasons to take control over Gucci: LVMH damaged by turmoil in Asia and losses at its retail division Gucci is seen as undervalued, strongly managed, and having potential growth Gucci is geographically attractive Gucci has higher % of sales in US 21. The Real ReasonThe Real Reason 22. The Start of the Battle (1999)The Start of the Battle (1999) 23. The Start of the Battle (1999)The Start of the Battle (1999) 24. The Standstill Agreement betweenThe Standstill Agreement between PPR and GucciPPR and Gucci Strategic Investment Agreement PPR is allowed to increase stake to 42% and disallowed to increase any stake >42% in 5 years time PPR is allowed to increase max 10.1% stake if LVMH increase its stake in Gucci If LVMH launch full bid, PPR has option to sell all shares or offer higher bid to buy Gucci Gucci can acquire Yves Saint Laurent and other perfume Lines from PPR for $ 1 billion 25. The Process of Full Takeover BidThe Process of Full Takeover Bid 26. Courts DecisionCourts Decision Gucci is guilty for mismanagement in terms of timing (article 2:8 of the civil code ) ESOP is invalid PPRs 42% stake in Gucci is valid 27. Dutch Supreme Courts DecisionDutch Supreme Courts Decision held that the enterprise chamber was wrong in finalized any decision without an official inquiry The chamber then appointed 2 Dutch Lawyers and a former CEO of a large financial institution as official investigators 28. Peace NegotiationsPeace Negotiations LVMH, Gucci and PPR met at offices at Darrois Villey in Paris Came out with a settlement agreement and revised Strategic Investment Agreement 29. The Settlement AgreementThe Settlement Agreement PPR spent $812 million to buy 8.6 million shares from LVMH at a price of $94 per share (a $2 premium) and making PPR own 53.2% of Gucci A special dividend of $7 per share will be given to all shareholders except PPR PPR will buy all shares which does not belongs to PPR at $101.50 in 2004 PPR has the right to a majority of the board and designate the chairman after the completion of the offers in 2004 LVMH will forgo all of the legal claims against Gucci and PPR 30. The End of the Battle (2001)The End of the Battle (2001) LVMH capital gain of 760 million euro Gucci- no longer under attack and able to do a lot of acquisitions PPR- able to get full control over Gucci in 2004 31. Changes in Structures Prior andChanges in Structures Prior and After the Takeover ProcessAfter the Takeover Process 32. Share PriceShare Price Source: Moneycentral.msn.com 33. Share PriceShare Price Share Price: Annual 2002-1998 Year NYSE High US$ Low Euronext Amsterdam High Low 2002 99.4 82.5 110.9 83.9 2001 94.7 66.7 109.1 66.5 2000 116.2 72.9 122.0 81.4 1999 121.5 61.0 121.9 56.6 1998 75.3 31.5 65.0 26.1 Source: SEC report on 31/7/2003 34. Capital StructureCapital Structure IAS Financial Data of Gucci 1998-2000 (in Euro Million) Source: SEC report on 31/7/2003 35. Top ManagementTop Management Name Position Age Yearof Initial Election DomenicoDe Sole Chairman 59 1995 TomFord ViceChairman 41 2002 AartCooiman Member 61 1995 Members of the Management Board (July 1, 2003): 36. Top ManagementTop Management Name Position Age YearofInitial Election AdrianD.P.Bellamy Chairman 61 1995 PatriciaBarbizet Member 48 1999 AurelianoBenedetti Member 67 1995 RetoF.Domeniconi Member 67 1997 PatriceMarteau Member 55 1999 FranoisHenriPinault Member 40 2001 KarelVuursteen Member 61 1996 SergeWeinberg Member 52 1999 Members of the Supervisory Board (July 1, 2003): 37. Business StructureBusiness Structure 38. Business StructureBusiness Structure 39. Corporate Financial PerformanceCorporate Financial Performance Revenue (Euro Million) Source: SEC report on 31/7/2003 40. Corporate Financial PerformanceCorporate Financial Performance Operating Profit (Euro Million) Source: SEC report on 31/7/2003 41. OwnershipOwnership Name No.of Shares Beneficially Owned Percentof Outstanding Share Capital Pinault-Printemps-Redoute S.A. 64,233,996 64.6 % Crdit Lyonnais S.A. 11,484,609 11.5 % Share Ownership (as a % of shares outstanding on July 1, 2003) Source: SEC report on 31/7/2003 42. Analysis of Similar MajorAnalysis of Similar Major Takeover That WasntTakeover That Wasnt SuccessfulSuccessful 43. Impact of Takeover Failure toImpact of Takeover Failure to IndustryIndustry 44. Impact of Takeover Failure toImpact of Takeover Failure to EconomyEconomy 45. ConclusionConclusion

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