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Hermes Shares Jump After LVMH Increases Stake to More Than 20%

LVMH Chairman Bernard Arnault
The increased stake may boost speculation that LVMH Chairman Bernard Arnault, seen here, is gradually targeting a takeover of Hermes. Photographer: Antoine Antoniol/Bloomberg

Hermes International SCA rose as much as 5 percent in Paris trading after larger luxury-goods rival LVMH Moet Hennessy Louis Vuitton SA said it increased its stake in the Birkin bag-maker to more than 20 percent.

Hermes gained as much as 7.80 euros to 164.45 euros, the highest price since Dec. 3. LVMH said late yesterday it has purchased more Hermes shares on the market, raising its holding from the 17.1 percent announced in October.

The increased stake may boost speculation that LVMH Chairman Bernard Arnault is gradually targeting a takeover of Hermes, even as the company said again it isn’t seeking a board seat or control. Descendants of the Hermes founding family said Dec. 6 they are setting up a new holding company to allow family members to sell without making their shares available to LVMH.

“Its determination looks strong,” Pierre Lamelin, an analyst at Cheuvreux in Paris, said of LVMH. “The first tranche was secured through the use of equity swaps at a very compelling price. The last tranche paid at the spot price shows that LVMH’s long-term intentions are clear beyond the financial coup.” Lamelin has an “outperform” rating on LVMH.

Hermes, the French maker of Kelly handbags that retail for about 7,000 euros ($9,200), has said that the three branches of its founding family are “fully united” in their desire to retain control of the 173-year-old company.

Hermes hired BNP Paribas SA and Bank of America Corp. as advisers last month to help fend off a possible LVMH takeover bid. LVMH can’t make an offer for all of Hermes until at least April 23, according to French regulations.

Equity Swaps

Hermes shares were up 3.85 euros, or 2.5 percent, to 160.5 euros as of 9:13 a.m. in Paris, boosting the company’s market value to 16.9 billion euros. LVMH fell 25 cents, or 0.2 percent, to 125.20 euros, valuing it at 61.4 billion euros.

LVMH bought the 17.1 percent stake via equity swaps. The French securities regulator is investigating whether that transaction complied with its rules. The increased stake will further reduce the percentage of Hermes stock that is publicly traded, already less than 10 percent. Hermes’s family shareholders own more than 70 percent of the company.

“Hermes can’t be taken over, especially if the family sticks together,” said Davide Vimercati, an analyst at UniCredit SpA in Milan. “LMVH should be able to raise its stake to around 25 percent, but that won’t be enough to take control. LVMH looks as though it is positioned in Hermes for the long term, but won’t be able to do much in the medium term.”

A Hermes spokeswoman didn’t return a call to her mobile phone seeking comment.

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