Feud far from over....

1. Luxury
Takeover?
2011 MBA

2. The players
LVMH Moet Hennessy Louis Vuitton SA
Mr. Bernard Arnault, Chairman & CEO
- 2010 Revenues: 20.32 billion € (+19%)
- 2010 Net Profit: 3.03 billion € (+73%)
- Dec 31st, 2010 Market Capitalization: 60.33 billion €
Hermès International SCA
Mr. Patrick Thomas, CEO
2009 Revenues: 1.91 billion € (+25% expected in 2010)
2009 Net Income: 288.8 million €
#Shares Outstanding : 105.57 million
Shares traded above 100€ in 2010, +88% in 4th quarter (closing 176.20€, 31st Dec)

3. October 2010: LVMH declares..
“……to be a long-term
shareholder and not taking
control of Hermes nor seek
board representation.”
“ We are peaceful investor,
which doesn’t mean we will
be passive…we can team up
to bring benefits”
• LVMH already had a long-standing direct stake in Hermès amounting to 4.92%
(below 5% disclosure threshold required by AMF – Autorité Marchés Financiers)
• On October 2010 LVMH closed derivative transactions for 12.85m Hermès shares,
that brought his stake in Hermès to 17.1% (10.7% of the voting rights), paying
only an average price of 80.50€ per share

4. Hermès reaction
• In France, must declare when a company reaches 5%, 10%, 15% threshold
in entering the capital of another company…Why did LVMH not declare?
• Meeting among Hermès family members, giving Management the
authority to investigate ways to prevent LVMH from increasing the stake
• Call from Bertrand Puech (Chairman and member of Hermes) to Mr.
Arnault – “Withdraw from Hermès!”
• Hermès - Talks to bankers and lawyers to prevent invasion and expansion
of LVMH

5. Why did LVMH not declare his stake in Hermès?
Mr. Arnault meets Bankers
Société Générale, Crédit Agricole, Natixis
2007-2008

6. Equity Swaps is the answer…
• Equity swaps enable an investor to bet on the value of a stock without
actually owning the shares
• An investor typically enters such a swap arrangement with a bank in return
for a fee
• To hedge its position, the bank will often buy and hold the underlying stock
• Because these options were settled in cash, under AMF rules, they do not
have to be declared
• Equity Swap transactions will be registered to five LVMH subsidiaries based
in Panama and Luxemburg

7. Hermès proposal for action…
Mr. Thomas meets the Shareholders
December 2010

8. • Hermès family controls 73% of the company and is determined to
remain independent
• Reinforce the defense through creation of a separate family Holding
Company comprising more than 50% of Hermès International
• The Holding Company would oblige the family to make an offer for the
whole company unless exempted by AMF
• Right of refusal on share sales by family members
Hermès debates
DECEMBER 2010

9. •Shares fell 1.9% after your
announcement
•LVMH’s swoop has already cut the free
float from about 25% to less than 10%,
which implies its share price movements
will be volatile
Liquidity in the stock has already
been reduced following LVMH’s
stake-building and would be
further reduced. Were the family
to agree to sell to one another!?
Hermes put its company into
the stock market and knows
the rules of the game! It is not
up to them to choose their
shareholders!
I should get a liquidity
premium to accept
that! Liquidity!
Liquidity, Liquidity!!!
Scary Facts
…Shareholder

10. Hermès adds tactic against LVMH…
Mr. Thomas
January 2011

11. Hermès vs. LVMH
• Hermès bolsters LVMH defenses:
- Go ahead by AMF to create family holding without having to
buy-out minority investors
• Minority shareholders upset – appealed against it
• “Hermès management members have said year after year that
no single shareholder controlled the company”
• “Cannot say they controlled the capital”
• Hermès proposes an interim dividend of 1€/share, to be paid
out of net cash of 830 million € (31st Dec, 2010)

12. • Will Hermès be able to
completely control the
intrusion?
• Will it be able to resolve
the issue with minority
shareholders?