Hermes Wins AMF Ruling on New Holding Company, Strengthening LVMH Defense

Hermes International SCA’s founding family can pool their shares in a holding company without having to bid for the rest of the luxury-goods maker, France’s stock market regulator said, bolstering its defense against LVMH Moet Hennessy Louis Vuitton SA. Family members, who own more than 70 percent of the shares, proposed the structure after LVMH, the world’s largest luxury- goods maker, announced in October it had acquired a 17.1 percent stake in Hermes via equity swaps. LVMH said on Dec. 21 it raised the holding to 20.2 percent, fueling takeover speculation even though it repeated it wasn’t seeking a board seat or control. Hermes fell as much as 3.7 percent in Paris trading after the Autorite des Marches Financiers ruled today that the three branches of the family don’t have to make a full bid. The AMF granted 31 waivers on mandatory tender offers in 2009, 22 of which were in similar cases, according to the regulator’s annual report for that year, the most recent information available. The new holding company will have more than 50 percent of the capital and have first right of refusal on the remaining shares held directly by the family, Hermes said Dec. 5. The family shareholders need a mechanism to allow them to sell without LVMH swooping on the stock, a person familiar with the matter said last month. Hermes shares fell as much as 5.80 euros to 152.25 euros and traded at 156.35 euros as of 3:26 p.m., giving the company a market value of 16.5 billion euros ($21.7 billion). About 7 percent of the stock is freely traded. Acting in Concert The founding family, which has previously stated it doesn’t act together, considers the holding company a reclassification of its shares. Colette Neuville, president of minority investor group Adam, had said a formal alignment of the relatives’ shares meant they would be acting in concert under AMF rules, obliging them to make a bid for the rest of the stock. “The proposed operation puts itself in total contradiction with information given to the market since its public listing,” Neuville wrote in a Jan. 4 letter to the AMF, arguing against the waiver. The family’s proposal “doesn’t respect the principle of equal treatment for shareholders” and “will have harmful consequences for minority investors,” she wrote. Neuville represents Hermes investors in Belgium, the U.S. and Switzerland in the matter and will discuss with them a possible appeal of the AMF decision, she said today by phone.