Paris—Luxurygood giant LVMH could have to pay a fine up to 10 million euros (about $13 million) from France’s financial markets regulator for its stealthily increasing its share in Hermès two year ago.
At a hearing last Friday, the sanctions commission o the Autorité des Marchés Financiers (AMF), which regulates France’s financial markets, concluded that LVMH “had lacked in its obligation to inform the market” [of such a move], which could be considered as serious an offence as an abuse of the law.
LVMH, which now owns 22.6% Hermès, surprised the stock market in October 2010 when it announced it had a 14% stake, gained partly via derivatives that allowed it to not declare its holding.
The AMF said LVMH should have disclosed in its accounts the size of its exposure to Hermès shares through equity derivatives acquired in 2008 as well as the fact it had a Hermes stake of just under 5% acquired in 2001 and 2002.
LVMH has denied any wrong-doing. Ahead of the hearing, LVMH’s attorney called for the charges to be dropped given what he called the “grave errors” which had been committed during the investigation.
It’s been pretty much an open secret that Bernard Arnault, LVMH’s chairman, has coveted Hermès. However, members of Hermès’ founding family, who control some 70% of Hermès’ stock, vehemently oppose LVMH. To prevent LVMH from acquiring even more of their company’s stock, the Dumas, Puech, and Guerrand families formed a holding company together to thwart LVMH, and according to Godé, one of their executives “has been waging a campaign of denigration and slander against LVMH that is extremely detrimental to LVMH’s image and reputation.”
The AMF is expected to deliver its verdict on the fine by the end of July, while its deliberations will also consider LMVH’s demand that the proceedings be annulled.