Hermes Gains on Speculation Founding Family Members May Consider Sale
Hermes International SCA rose the most in more than nine months in Paris trading on speculation the luxury-goods company’s founding family may be more willing to sell following the death of former president and chief executive Jean-Louis Dumas.
Hermes rose as much as 4.47 euros, or 4.5 percent, to 104.10 euros and traded at 101.95 euros at 1:50 p.m. Dumas, who led the maker of silk ties and saddles for nearly three decades, died May 1 aged 72, Hermes said. Hermes has a market value of about 10.8 billion euros ($14.3 billion).
“Some people may believe that the other family members will now be more willing to sell,” Antoine Belge, an analyst at HSBC in Paris said today by telephone. “We think the descendents of the founder are still committed to keeping the company independent, especially the fifth-generation members who still control the majority of the voting rights.”
Hermes stock has been buffeted since Dumas retired in 2006 by speculation luxury rivals LVMH Moet Hennessy Louis Vuitton SA or Cie. Financiere Richemont SA might make a takeover bid. Hermes, the maker of Kelly handbags that start at 4,000 euros, is trading on an estimated price-earnings ratio of 32.4 compared with 19 for LVMH and 22 for Richemont, according to data compiled by Bloomberg.
Sonia Fellmann, a spokeswoman for LVMH, did not immediately return calls seeking comment. Alan Grieve, Richemont’s corporate affairs director, wasn’t immediately available to comment.
‘No Plans to Sell’
The Hermes family, which owns about 74 percent of the company, has “no plans to sell and nothing is going to happen in the short to medium term,” Patrick Thomas, who succeeded Dumas as sole CEO in 2006, said in a March interview. Thomas, the first non-family member to run the 137-year-old company, said last May there would be no sale of a majority stake while the fifth and sixth generations of the family were in control. A Hermes spokesperson wasn’t immediately able to comment.
Hermes’s operating profit margin was 24.2 percent in 2009, data compiled by Bloomberg show. LMVH’s was 19.7 percent while Richemont’s was 18.1 percent in the year ended March 2009.
Dumas’s death “shouldn’t change at all the family’s attachment to the group and its desire to stay in control,” Loic Morvan and Cedric Rossi, analysts at Aurel BGC in Paris wrote in a note today.
Members of the Hermes family sit on the executive committee and supervisory board. Dumas led Paris-based Hermes from 1978 until his retirement in 2006, when he was succeeded by Thomas. Dumas, who remained honorary executive chairman of the company until his death, is survived by his daughter Sandrine, and son Pierre-Alexis, who is Hermes’s artistic director.
To contact the reporter on this story: Andrew Roberts in Paris at firstname.lastname@example.org.