The Hermes International family shareholders are protecting their investment by forming a new holding company. The formation of this new collective will effectively thwart any takeover bid by LVMH, which currently holds a 21.4% stake in the fashion house.
A French court approved the family shareholders move. They currently own more than 71% of the company, and will create the holding company with more than 50% of the company’s shares. They can happily do this without buying out the minority shareholders.
Under French stock market rules, a group controlling more than a third of any company most launch a bid on the shares it doesn't own. In January the country's stock market regulator, Autorite des marches financiers, exempted the Hermes family shareholders from this requirement. This angered Adam, a group of minority shareholders, who appealed to have the decision reversed. The court ruled that a holding company could be viewed as "a reclassification between people belonging to the same group, without any impact on control of the Hermes business."
The fashion house's chief executive officer Patrick Thomas said the decision ensures Hermes independence for the next couple of decades. He added that is also sends a signal "to the house's employees and to the outside, including LVHM, about its unity."
The holding company will be formed within weeks to "provide lasting comfort to the Hermes group's independence, the continuing of its strategy of creativity and hand-crafted excellence and the respect of its values."
However it might not be over just yet. Colette Neuville, the head of Adam, has expressed her disappointment at the decision. Her group is apparently deciding whether it will appeal to the French Supreme Court.
Personally I can understand why the family shareholders are working so hard to protect their investment. Which way do you hope this case goes?
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