French wines, spirits and luxury goods group LVMH Moet Hennessy Louis Vuitton SA (MC.FR) said Tuesday that it has built its stake in the capital of French luxury goods company Hermes International SCA (RMS.FR) to 20.21% from the previously disclosed 17.1% and said it could make more acquisitions as market circumstances allow, thus turning up the heat in its disputed attempt to build a bigger stake in family controlled Hermes. Hermes declined to comment on this latest LVMH shot in its battle to remain independent of the big diversified luxury products group controlled by French financier Bernard Arnault. The Hermes family, which consists of fifth- and sixth-generation descendants of the company's founder, collectively owns 73.4% of their company. In a terse news release, LVMH said it "has crossed the threshold of 20% of Hermes International and today holds 21,338,675 shares." It didn't elaborate. But the company added that it has further access to 204,056 Hermes shares via an equity swap that it can exercise at a future date. In a separate statement, the French bourse regulator Autorite des Marches Financiers said LVMH had informed it that the Hermes holding rose above the 20% mandatory reporting threshold last Friday, as subsidiaries bought the shares in transactions on and outside the stock market. At present, five LVMH entities hold the aggregate 20.21% of the stock and 12.73% of the votes in Hermes. The LVMH Fashion Group holds the biggest chunk of that stock--10.05%, according to the company's regulatory filing. LVMH told the AMF that it isn't acting in concert with outside parties in its Hermes share acquisitions. LVMH also reiterated that it doesn't plan at this time to seek the nomination of a representative to the Hermes board of supervisors, and that it doesn't envisage taking control of Hermes or making a public offer for its shares. Under current French rules, LVMH would have to launch a public tender offer for Hermes if its stake grew beyond a third of the capital, which would be unlikely given the family's 73.4% shareholding. "The investment of LVMH in Hermes International is strategic and long term," LVMH said in its regulatory filing, repeating its previously stated intention. "LVMH supports the strategic vision, the development and position of Hermes International." Members of the Hermes family said earlier this month that they will set up a holding company that will keep more than 50% of the Hermes International, in an attempt to fend off LVMH, although the move seemed redundant as Hermes is a limited partnership, which alone makes it pretty much impregnable to attack. The family is awaiting approval from the AMF for the holding company maneuver, without being required to launch a full takeover. The AMF is expected to issue its decision in the coming weeks. LVMH, which the world's largest luxury-goods company, surprised markets and the Hermes family in October when it said it owned 17.1% of the famous saddlery maker, in one swoop crossing three ownership thresholds requiring disclosure under French market regulations. Arnault built the bulk of that stake by exercising equity swaps secretly acquired several years ago. While LVMH insists it isn't out for a takeover, Hermes executives and family members are wary of LVMH's presence in its capital. LVMH Chairman and Chief Executive Arnault built his luxury empire by collecting smaller, often family run, companies.
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