The Hermes family stood defiant against luxury products giant LVMH on Monday, saying it was united behind a drawbridge defence of the family jewel, the Hermes brand on handbags, scarves and perfume. Hermes executive Bertrand Puech, a member of the family, said that "LVMH will not be able to take control of the group" in remarks to the newspaper Le Monde. Members of the founding family said Sunday they had locked up more than 50 percent of the shares in Hermes in a holding company. This defence now depends on regulatory assent, which Puech said he was "confident" would be given. The price of Hermes shares fell by 3.15 percent and then rallied for an early afternoon fall of 1.10 percent to 148.90 euros. The extended family, which has inherited the Hermes business, owns 73.4 percent of the company which makes and retails a wide range of luxury products sold around the world. The shares had risen strongly recently on a belief that the head of LVMH, Bernard Arnault, was manoeuvering to seize control of Hermes. Soon after he announced his arrival in the capital, Hermes shares rose above 200 euros. The price of shares in LVMH (Moet Hennessy Louis Vuitton) fell by 0.53 percent to 121.05 euros. LVMH is a leading global luxury products and retailing group owning a long list of top brand names. The decision by the Hermes family to lock away more than 50.0 percent of the business in readiness for a siege was taken by a meeting of 73 inheritors in response to a raid by LVMH which captured 17.1 percent of the capital in October. The creation of the holding company is intended to prevent LVMH, now the second-biggest shareholder after family interests, from taking control by buying more shares. LVMH has said the purchase of its stake was a "friendly" courtship but it has rejected a request from Puech to sell its shares. Puech, who chairs the family management board, said that the decision to block LVMH "is one more demonstration to all those who do not want to believe us. We are a united family, driven by the same spirit of transmitting to our descendants the unique jewel which we have received from our parents." At CM-CIC securities, analysts said the main question now was the attitude of the stock market authority AMF towards this method of defence against takeover, which the family considers is probably LVMH's objective. Under stock market rules, a shareholder or group of shareholders who build up a stake of more than one third in a company, must make an offer for all the shares. Although the inheritors own 73.4 percent, no single member owns more than 5.0 percent. The family already had a partial defence mechanism in place in the form of a French company structure enbaling a family to retain management control of a company even if it is a minority shareholder. The family argues that the creation of the holding company amounts merely to an internal reorganisation of the family interest and does not affect the control of the company by the family. CM-CIC took the view that the family would do its utmost to be able to activate the holding company without having to launch a full bid. At brokers Aurel BGC, analysts said the AMF would probably allow the holding company to go ahead without forcing the family to mount a takeover. But a high-profile defender of the interests of minority shareholders in companies, Colette Neuville, said last week that she would urge the AMF not to exempt the family from the obligation to make a bid. The AMF has opened an investigation into the methods used by LVMH to carry off the 17.1-percent stake it now holds. LVMH insists that it acted within the rules
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