LVMH Takes Stake in Hermes, Fueling Takeover Talk

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As the luxury goods market looks to rebound next year, we’re already seeing some interesting jockeying for position.

Shares of Hermes and LVMH rose sharply today on news that LVMH had acquired as much as a 17 percent stake in the high-end luxury brand Hermes.

LVMH, a French conglomerate, already has ownership of iconic luxury brands in a variety of markets. In fashion and perfumes, the company owns Christian Dior, Donna Karan, Fendi, Givenchy, and Louis Vuitton; in jewelry and watches, De Beers, Hublot, and TAG Heuer; in wines and spirits, Dom Perignon, Hennessy, Krug, and Moet & Chandon.

Increasing its holdings in Hermes is a “friendly” move, not a takeover bid, says LVMH. According to the company, “The objective of LVMH is to be a long-term shareholder of Hermes and to contribute to the preservation of the family and French attributes which are at the heart of the global success of this iconic brand.” [more]

Nonetheless, some analysts, like Luca Solca at Sanford Bernstein, see it differently. Solca tells the Wall Street Journal, “This indeed seems a way for LVMH to be in pole position for a future Hermes acquisition. LVMH is very much in ‘mass luxury’ and Hermes could complement that with a higher-end focus.”

LVMH and other luxury goods marketers are anticipating a significant upswing in demand, particularly in the Chinese market. What better time for LVMH to pursue a strong quality brand such as Hermes and potentially add it to the company’s ever-growing portfolio.

 

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