The two luxury goods groups have agreed to put an end to their legal quarrels following an agreement on the redistribution of LVMH's 23.2 percent stake in Hermès International, worth about €6.8 billion, among its own shareholders. By next Dec. 20, the latter will receive one share in Hermès for every 21 LVMH shares they own.
Both sides are happy about the deal. The 70-odd family shareholders of Hermès will no longer fear a hostile takeover of their company by LVMH and its free float on the stock exchange will more or less triple to 21.4 percent of the equity, reducing speculation around the stock. LVMH will come out with an underlying capital gain of €2.4 billion, on top of a gain of €1 billion already taken.
Its biggest shareholder, Bernard Arnault, will still own 8.5 percent of Hermès through Groupe Arnault and Christian Dior, which holds 42 percent of LVMH's shares. They and LVMH have committed themselves not to purchase any other shares in Hermès for the next five years. Furthermore, Christian Dior will redistribute its Hermès shares to its own shareholders including Groupe Arnault, which holds 70 percent of its shares.
As previously reported, LVMH has been amassing shares in Hermès since 2002, moving secretly on occasion through equity swaps - a behavior that was sanctioned by French stock exchange authorities in October 2010 with a fine of €8 million.
Meanwhile, Hermès reported new figures that showed a slight decline in its high profitability. Its operating margin fell to 32.6 percent in the first half of 2014 from the record level of 33.1 percent attained in the comparable period of 2013, due entirely to currencies. The company was unable to compensate the lower value of the Japanese yen with a 10 percent increase in prices implemented in the country.
Net earnings went up by 8.1 percent to 21.6 percent of Hermès' revenues. As previously reported, the group's global sales of €1.9 billion in the six-month period showed a 12 percent increase in terms of local currencies. Clothing, footwear and other accessories enjoyed the biggest growth at 15.8 percent, and came to represent 23 percent of the total turnover.
In commenting on the figures, Axel Dumas, the young new chief executive of Hermès, said that the group has big ambitions in the footwear sector under the guidance of the artistic director of its shoe collection, Pierre Hardy. In the women's wear sector, the former artistic director, Christophe Lemaire, has been replaced by Nadège Vanhee-Cybulski.
Dumas announced that Hermès would open or renovate around 15 stores this year. Hermès has just opened its 20th store in China. Located on Huaihai Road in Shanghai and measuring more than 1,200 square meters, it's the fifth “Maison Hermès” flagship store around the world, joining those it operates in Paris, New York, Tokyo and Seoul.