Gucci share deal signals end of PPR/LVMH dispute
Two and a half years after it broke out, the ongoing dispute between the French tycoons Bernard Arnault and Francois Pinault over the Italian luxury goods group Gucci was finally declared over last week.
In the end, a carefully crafted agreement between Arnault’s LVMH (Moët Hennessy Louis Vuitton) and Pinault’s PPR (Pinault-Printemps-Redoute) was all it took to break the deadlock, which was sparked by PPR taking a 42% ‘White Knight’ stake in the Florentine fashion house in March 1999. (See leatherbiz.com story PPR/LVMH look set to bury the hatchet - 10.9.01).
Under the agreement, which will roll out in stages, PPR will first acquire 40% of LVHM’s 20% stake in Gucci at $94 per share, thereby gaining majority control. In return, Arnault will pocket an estimated Eur2.1 billion ($1.9 billion).
The second stage, which will take place before the end of the year, will entail a $7 a share special dividend from Gucci to all shareholders worth around $400m. The final stage will be an offer underwritten by PPR for the remainder of LVMH's holding and an outstanding free float at $101.50 a share in March 2004. On announcement of the deal, Gucci shares climbed 4% to $88.
Meanwhile, LVHM has revised its forecast for full-year operating profit growth downwards, following last week’s atrocities in the United States.
The company said customers in all its main markets were expected to drastically cut back on their spending on luxury goods, as they mourn the thousands of victims and worry about security. "In view of the situation created by the tragedy which has just struck the USA, the group is adjusting its forecast of operating profit growth in 2001 to a range of between 5% and 10%", a company statement said. LVMH made the announcement as it reported its first half figures, which showed a 17% fall in net profits to Eur318 million.
The company’s shares fell 5.41 percent to Eur40.75, just as the Paris CAC 40 index had moved them into positive territory following the Gucci deal.
