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LVMH and Hermes call truce in "handbag war"

Published on Sep 4, 2014 1:25 AM
 
 A long and bitter battle that has gripped the luxury goods industry and pitted two of France's richest families against each other came to an unexpected end on Wednesday when LVMH and Hermes agreed to a truce. -- PHOTO: AFP  

PARIS (Reuters) - A long and bitter battle that has gripped the luxury goods industry and pitted two of France's richest families against each other came to an unexpected end on Wednesday when LVMH and Hermes agreed to a truce.

Under the deal, LVMH - the world's No.1 luxury group, controlled by France's wealthiest man Bernard Arnault - agreed to relinquish most of its 23.2 per cent stake in Hermes and not acquire any shares in its smaller rival for five years. It effectively buried the possibility LVMH could make a full takeover bid for the 177-year-old maker of Birkin and Kelly handbags.

Such a prospect had boosted Hermes's stock, which has been trading at a price-to-earnings ratios of about 30 times in recent years, a 70 per cent premium to the industry average.

Shares in Hermes fell nearly 10 per cent to 236.5 euros (Sing$388) in early trading on Wednesday, wiping out 2.8 billion euros off its market value - equivalent to around 350,000 Birkin handbags based on an average price of 8,000 euros. By market close, they were down 3.5 per cent.

 
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