French Stock Market Regulator to Rule on LVMH Insider Trading Charges in Hermès Case

Paris—Although the Autorité des Marchés Financiers (AMF), the French stock market regulator, probably won’t make a decision on whether LVMH violated insider trading or share price manipulation when it took its initial stake in Hermès in 2010, the AMF’s chairman this week indicated he didn’t think LVMH engaged in insider trading.

The AMF opened an investigation into LVMH’s stake in Hermès, which has proved controversial from the start. When LVMH first revealed it has bought a 14% stake in Hermès in Fall 2010, the luxurygoods conglomerate was able to build up its stake unnoticed through derivatives (a legal loophole that has since been closed). Hermès and its majority shareholders, mostly members of the founding families, viewed LVMH’s stake, which eventually grew to nearly 22%, as a hostile takeover attempt.

Hermès, which had demanded LVMH sell its stake, sought to thwart any takeover attempt by receiving permission to create a holding company to own Hermès thereby cutting out other potential suitors.

LVMH Countersues Hermès for Slander

This week, when Gerard Rameix, the AMF’s chairman, was being interviewed on BFM Radio he was asked whether he though LVMH had engage in stock manipulation in the Hermès case, he replied he didn’t think so, adding, “The case will be examined by our sanctions committee, I believe, in the first few months of 2013.”

LVMH refused Hermès’ founding families demands that it sell off its Hermès shares. Bernard Arnault, its chairman, and others have said LVMH’s stake in Hermès is a “friendly investment.” LVMH hasn’t asked for a board seat, but said it would remain an active investor.

Furthermore, LVMH has consistently denied any wrongdoing, saying its acquisition was “entirely legitimate.” An LVMH spokesperson said the AMF investigation was normal procedure and not indicative that the luxurygoods giant would be sanctioned.

Hermès’ founding families aren’t giving up their battle to rid the company of LVMH. Besides their civil complaint with the AMF, they filed a criminal complaint with the Paris prosecutor in July, again accusing LVMH of insider trading.

Last month, LVMH responded with a countersuit against Hermès “for slander, blackmail and unfair competition.”

 

 

 

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