Twenty members of Hermes International SCA’s founding family opted against putting their shares in a new holding company, potentially offering an inroad for LVMH Moet Hennessy Louis Vuitton SA to build its stake.
The family members concerned own at least 7 percent of Hermes, an Hermes spokesperson confirmed. The holding company, proposed last month by 52 other relatives to bolster the family’s defense against LVMH, will have 50.2 percent of the Hermes shares and at least as many voting rights, in addition to the first right of refusal on another 12.6 percent of shares.
The founding family, which includes the Dumas, Guerrand and Puech branches, controls more than 70 percent of all Hermes shares. Since LVMH unveiled a 17.1 percent holding in the Birkin bag maker in October, the family has said it wants to keep the company independent. LVMH now owns 20.2 percent of the stock and has said it’s not seeking control or a seat on the Hermes board.
That some family members have opted against putting their shares in the holding company may pave the way for Paris-based LVMH to boost its stake, Luca Solca, an analyst at Sanford C. Bernstein, said in a phone interview.
“The fact that they took the pain to create this holding company in the first place is an indication that the family is less unified than they want us to believe,” Solca said. LVMH Chairman Bernard Arnault may seek to exploit any divisions within the family, the analyst also said.
Olivier Labesse, a spokesman for LVMH, declined to comment.
Hermes shares rose as much as 2.45 euros, or 1.5 percent, to 161.95 euros and traded at 160.95 euros as of 9:35 a.m. in Paris trading. The shares have dropped 9 percent since Oct. 22, the last trading day before LVMH disclosed having bought a stake for an average of about 80 euros a share, or about half the stock’s value at the time. Prior to that, Hermes shares had surged since the May 1 death of former Chief Executive Officer Jean-Louis Dumas on speculation members of the founding family may be more willing to sell.
The 174-year-old company has a market value of 16.9 billion euros ($21.9 billion) while LVMH, the owner of Fendi and Moet champagne, is worth 58.5 billion euros.
The decision by the 20 family members “doesn’t mean they aren’t supportive” of the possible takeover defense, Patrick Albaladejo, Hermes’s deputy managing director, said in a phone interview. They can still put their shares into the new vehicle at a later date and even if they don’t, the family will still have a majority stake and full control of Hermes’s voting rights, he said.
France’s market regulator last week granted the family a waiver on having to bid for the rest of the luxury-goods maker, agreeing that the new structure constituted a reclassification of their shares and didn’t change control of the company. Minority investor group Adam plans to appeal the ruling.
All 72 adult family members sent a letter to employees praising the AMF’s decision, the spokesperson said. While LVMH may raise its Hermes stake to more than 25 percent in the short term, the new holding company’s share bolsters the family’s defense, Solca said.
“To get control of the company, something else will have to happen and this will likely take some time,” he said.
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