Bag your share of Hermès

A Birkin isn't enough. Buy a share in the French company instead I fell in love with all things Hermès very late. When I was gifted Michael Tonello's beautiful book, Bringing Home the Birkin, only a few years ago, I realised the almost-sinister craze for acquisitions in the world of luxury, especially those that came in an orange Hermès shopping bag. The LVMH group seems to be echoing my sentiment too these days. In acquiring 17 per cent of Hermès last month, they have begun a battle so fierce, it threatens to shake the luxe industry in the same manner their war with Gucci did ten years ago. LVMH fought the Italian label's family, their CEO Domenico de Sole and chief designer Tom Ford, in trying to buy the house, which later sold to Francois Pinault's PPR group. But Hermès is different. It's still a homegrown French label, with an adored history of 170 years. The war between LVMH and Hermès has not only shaken up the fashion business, it's also making France re-look and regulate its stock-holding laws. It has been reported that LVMH chairman Bernard Arnault bought some 15 million shares of Hermès by stealth, using various derivatives (buying the rights to purchase shares once the shares reached a certain value). The Hermès family, that still owns over 70 per cent of their company, did not know about this. How is this possible? French company regulators require investors to disclose their stake in a company only when it is 5 per cent or more. Ironically, this is meant to ensure that investors are transparent and cannot just come out of nowhere. Andrew Ross Sorkin, a financial journalist with the New York Times, writes, "Mr Arnault's approach was perhaps more insidious: he used derivatives to build up a stealth position in Hermès starting in 2008 so that he would not have to declare ownership until he was ready to pounce. It is all legal. But the real question is, Should it be?" Even though, Arnault has said his bid was "friendly" and he has no intentions to take control of Hermès, the Hermès family—some 70 inheritor— is trying to buy back his shares, by no means an easy task. LVMH executives responded with 'better us than the Chinese'. Patric Thomas, CEO of Hermès, says, "I don't think a house like Hermès is capable of surviving in a universe defined by money." Hermès has indeed come a long way since Thierry Hermes built his business making saddles for noblemen. Today, the label is synonymous with a quiet luxury that comes from a tradition of hand-crafting leather goods. Besides their leather accessories, Hermès is a treasure trove of scarves, ties, beachwear and perfumes — all smaller items that are major sellers. Thomas has stated that the first nine months of 2010 have been the best the company has seen in ten years, "perhaps in its history". But it's the battle with LVMH that has made shares of Hermès skyrocketed up to 15 per cent a week. Think of the company: it has all the trappings, big personalities, big money and a big family business to protect. Instead of picking up another Hermès handbag, buying a share or two in the company seems to be a better bet.