Lately, it seems like the two premier luxury brands
will never make peace as both have been filing lawsuits against each
other. Now add one more. In its complaint filed with commercial court
in Paris, Hermès accused LVMH of "most important fraud in the history of the French stock market." Hermès
wants the court to undo the transactions that allowed LVMH to secretly
build up a large stake in its company. LVMH used a series of equity
swaps to purchase shares without having to declare its stake over 5%.
As explained by 4-traders.com,
"Equity swaps are market instruments that allow investors to bet on movements of a share price without actually owning the shares. LVMH initially built up a position in Hermes shares through equity swaps over a period of several years and decided to settle the transactions with actual shares instead of cash. LVMH eventually acquired 12% of Hermès through the equity swap contracts.
Because of the fragmentation of the stake, LVMH was able to avoid, for a time, the legal obligation to reveal it, which usually becomes necessary when an investor owns at least 5% of a company, according to French market rules. Since 2010, LVMH has continued buying shares on the market and now holds a 22.3% stake in Hermes the luxury giant disclosed in a filing to France's stock market regulator."
According
to French newspaper, The Local, "Hermès demands that LVMH sell back the
stock to the three banks - Societe Generale, Natixis and Credit
Agricole - which are themselves accused in court of acting as de-facto
fronts for the alleged takeover attempt."
Hermès also
filed a criminal complaint against LVMH alleging insider trading
earlier in the year which got the French regulators involved. LVMH then counter-sued claiming slander by an Hermès executive.
Read more
WWD (subscription req'd): French Luxury Brands Head to Court
4-traders: Hermes Files Lawsuit Against LVMH
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