PPR/LVMH look set to bury the hatchet
The on-off discussions between warring Gucci shareholders Moët Hennessy Louis Vuitton (LVMH) and Pinault-Printemps- Redoute (PPR) appeared finally to be on course to some form of meaningful conclusion last week.
Ever since PPR snatched a 42% ‘white knight’ stake in the Netherland’s-registered Florentine fashion house from under the nose of LVHM in March 1999, the two sides have been at loggerheads. The manoeuvre was especially galling for the head of LVMH, Bernard Arnault, in that it diluted his own luxury branded goods empire’s stake in Gucci to around 20%. The situation has been the source of endless legal wrangling in the Dutch courts since, leading to what has become known as ‘The War of the Handbags.’
But now it appears an end to the feuding may finally be in sight. Arnault’s latest legal challenge – to prove that the Gucci board was negligent in allowing the PPR shareholding to go through – looks to have had effect he was looking for. Anxious to avoid yet another legal round, which theoretically could result in PPR being forced to relinquish its shareholding, the founder of the French retail group, Francois Pinault, has put forward a three-stage offer which the Arnault camp is said to be taking seriously.
The scenario under discussion will unfold in three phases. First PPR, will purchase 40% of LVMH’s stake for about $95 a share, giving the group majority control. Then, towards the end of the year, a dividend of nearly $7 will be issued to all Gucci shareholders with the exception of PPR. Finally, by March 2004, LVMH will exercise an option on the remainder of its stake for $101.5 a share. Once the operation is complete, the various court cases brought by the two groups against each other will be withdrawn immediately.
Although the proposed deal would earn Arnault an estimated $700 million profit on his original investment in Gucci, it is not seen as being an outright victory for the French billionaire as it would also obviously involve him losing his stake in one of the world’s most successful luxury groups that incorporates the brands Yves Saint Laurent, Sergio Rossi, Boucheron, Roger & Gallet and BÉDAT & Co, as well as the core Gucci brand itself.
