The Gucci - LVMH Battle


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Case Details:

Case Code : FINC013
Case Length : 7 Pages
Period : 1999-2001
Pub. Date : 2002
Teaching Note : Available
Organization : Gucci, LVMH, PPR
Industry : Consumer Goods & Services
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

The Battle for Gucci

LVMH had begun stalking Gucci since the beginning of January 1999 by acquiring more than 5% of its shares. By the end of January 1999, LVMH's stake in Gucci had increased to 34%.

On January 27th, 1999, Arnault arranged a meeting with De Sole, at which he proposed that, since he was now one of Gucci's largest shareholders, he be allowed to name a director to its board. De Sole however believed that Arnault's people should not be put on the Gucci board, since they were from the rival fashion house Louis Vuitton.

De Sole could not afford to let them have access to inside information regarding store space, publicity, and designers. De Sole alleged that Arnault was plotting a 'creeping takeover' by gradually buying enough shares to dominate Gucci's board. De Sole then asked Arnault to buy the remaining shares...

The Battle Ends

In July 2001, followers of the Gucci-LVMH tussle were surprised to see media reports that claimed that the battle was over. LVMH had agreed to sell its 20% stake in Gucci to PPR for $ 2 billion under a condition that PPR forfeit voting rights on this stake.

PPR bought the LVMH stake at $ 94 per share, raising its stake in Gucci to 53.2%. As a first step, PPR was to buy half of LVMH's 20% stake for $ 975 million. Then, Gucci was to pay a special dividend of $ 7 per share to all shareholders except PPR in November 2001. Next, PPR was to launch a full public offer for all Gucci shares at $ 101.50 per share in March 2004.

PPR, Gucci and LVMH also agreed to release all outstanding claims and withdraw all pending litigation. PPR was planning to finance the deal by issuing equity and convertible bonds. Media reports revealed that the deal was struck at the behest of Dutch investigators, who urged the three parties to reach an agreement without seeking legal intervention...

 

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