Paris—Hermès International’s family majority shareholders got a go ahead today to form a holding company that would thwart any takeover attempt by LVMH, which has amassed a 21.4% stake in the luxurygoods house.
A French appeals court ruled in favor of the family shareholders, who own more than 71% of Hermès’ shares, for their plan to create a holding company with more than 50% of the company’s share without being required to buy out all minority shareholders.
Under French stock market regulations, when a group controls more than 33% of a company, it is required to launch a bid on the shares it doesn’t own.
But in January, the Autorité des marchés financiers (AMF), the French stock market regulator, exempted the family shareholders from the requirement.
Soon after, Adam, a group of minority shareholders, filed a complaint asking the appeals court to reverse the decision.
But the court ruled that a creation of a holding company could be seen as “a reclassification between people belonging to the same group, without any impact on control of the Hermès business.”
Hermès executives and family shareholders hailed the decision today. Patrick Thomas, ceo, told French press that the family shareholders could now insure Hermès’ independence for the next 20 years.
By establishing a holding company, it “is a signal that the Hermès family would like to send to the house’s employees and to the outside, including LVHM, about its unity,” Thomas said.
Ruling Insures Hermès’ Independence
Confirming that they would indeed form the holding company within weeks, the family released a statement, saying, “This will provide lasting comfort to the Hermès group’s independence, the continuing of its strategy of creativity and hand-crafted excellence and the respect of its values.”
The family shareholders took defensive action after LVMH announced last October it acquired a 17% stake in Hermès, eventually increasing it to 21.4%. Family members and company executives demanded LVMH sell back the shares.
LVMH, the world’s largest luxurygoods conglomerate, denied it planned a takeover, saying its stake was a “strategic and long-term” investment. Nor did the company request a board seat.
The battle got more complicated when Adam challenged the AMF decision. Acting on behalf of minority shareholders,who could benefit from a contested takeover as the bidder or bidders might increase, Adam entered the fight on a third front.
Colette Neuville, head of Adam, said she was disappointed by the ruling and a blow to minority shareholders’ rights. She added that her organization will decide if it will appeal to the French Supreme Court.
Trading of Hermès stock was suspended today pending the courts decision and will resume on Friday.
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