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| Bernard Arnault |
Bernard Arnault has done it again. While no one was watching the chairman and CEO of LVMH Moët Hennessy Louis Vuitton has captured another prize: Bulgari.In a few hours the two companies will announce that LVMH will purchase a 51 percent share of the Italian luxury jewelry house, according to the Financial Times and other published reports. The purchase will come in the form of a share swap. A person close to the deal told the FT that as part of the deal, Francesco Trapani, Bulgari’s chief executive, will take a senior position in the LVMH group, while Bulgari family members will get board representation. According to the report the Bulgari family is united in agreement for the sale. This is in contrast with LVMH’s 20-percent position in Hermès, the Parisian luxury house, which is still being talked about in luxury circles. This deal was done in late 2010 through a complex derivatives position without the knowledge of the heirs of the Hermès family, who own 70 percent of the fashion house. The family has publicly voiced its disapproval. Update, March 7, 2:35 a.m EST: LVMH just released its announcement of the acquisition with addition information. Upon completion of the share transfer process, LVMH said it will issue 16.5 million shares in exchange for the 152.5 million Bulgari shares currently held by the Bulgari family, who will become the second largest family shareholder of the LVMH Group. In compliance with the Italian Stock Exchange regulations, LVMH said it will submit a Public Purchase Offer at the price of €12.25 per share on the shares held by minority stockholders.The statement further defines Bulgari executives’ positions in LVMH. Paolo and Nicola Bulgari will remain chairman and vice chairman of the Bulgari S.p.A. Board of Directors, respectively. The Bulgari family will have two representatives on the LVMH Board of Directors. Trapani will join the executive committee of LVMH and will assume, in the second half of 2011, the management of the LVMH enlarged watches and jewelry activities, which includes the brands TAG Heuer, Chaumet, Zenith, Hublot, Fred and De Beers. Philippe Pascal, the current head of jewelry and watch group, will remain on the LVMH executive committee and be given new responsibilities within the Group, the statement said. “Our entrance into LVMH will allow Bulgari to reinforce its worldwide growth and to realize noteworthy synergies, in particular in the areas of purchasing and distribution,” Trapani said. “Bulgari and these brands will be able to invest and innovate even further to become the world leader in the high end segment.”Arnault added: “We share the same culture in terms of respect for identity and roots of the brands, quest for excellence, creativity and innovation. As is the case with LVMH, the Bulgari family shareholders are directly involved in managing the company, they are entrepreneurs that know and excel in all aspects of the business, from the creation of the product to after sales service. It is for these reasons that we immediately understood each other and agreed on the way we would work together.”
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| Bernard Arnault |
If there are any doubts that Bernard Arnault is interested in a majority stake in Hermes, they have been settled. In a one-sentence statement through his company, LVMH Moët Hennessy Louis Vuitton, the billionaire businessman says he now owns 21,338,675 Hermes shares, just over 20 percent of the family-owned, Parisian luxury goods company.Paris-based LVMH enraged Hermes family members in October when it revealed it had taken a 17.1 percent stake in the company. Arnault, said at the time LVMH would continue to buy more shares but did not intend to take control, to make a public offer for the company nor to seek seats on the board.The family shareholders of Hermes called for Arnault to withdraw his Hermes' capital.AFP reports that LVMH is now the single largest shareholder in Hermes but it is controlled by the descendents of founder Thierry Hermes who between them hold 73.4 percent of the capital.LVMH, the world's leading luxury group, controls brands such as Louis Vuitton, Givenchy, Dom Perignon and Dior. I was first alerted to this story through the Lorre White, The Guru of Luxury, website, so special thanks to Lorre.
In addition, the world’s leading luxury products group reported that profits from recurring operations for the period increased by 33 percent to €1.8 billion and Group share of net profit increased by 53 percent to €1.05 billion ($1.37).
“The 2010 first half results, once again, demonstrate the exceptional appeal of our brands as well as the effectiveness of our strategy, as pertinent in the context of a recovery in 2010 as it was during the global economic crisis in 2009,” said Bernard Arnault, LVMH chairman and CEO. “All LVMH’s business groups contributed to this excellent half year. Operating margin has improved considerably thanks to robust revenue growth and the control over operating costs. This focus on cost control will continue into the second half of the year despite the momentum in the markets. The Group approaches the end of the year with confidence and is relying upon the creativity and quality of its products as well as the effectiveness of its teams to pursue further market share gains in its historical markets as well as in high potential emerging markets.”
The Watches & Jewelry business group registered revenue growth of 28 percent and a 145 percent increase in profit from recurring operations, the company said. The increase in purchases by retailers, coupled with the rise in consumer demand, contributed to the strong performance. TAG Heuer celebrated its 150th anniversary and grew strongly in China and the United States. Hublot’s King Power line was well received and the recent integration of the "Confrérie Horlogère" team has strengthened the brand’s expertise. Zenith benefited from the success of its new models. Fred, Chaumet and De Beers enjoyed momentum in their networks of stores. The launch of the Josephine collection was one of the highlights of the period for Chaumet.
Following considerable destocking in 2009, the Wines & Spirits business group recorded revenue growth of 21 percent and an increase of 35 percent in profit from recurring operations, the company said. Champagne sales saw a significant rebound during the period thanks to improvements at prestige brands, which had been adversely affected in 2009. In the Cognac business, Hennessy experienced strong momentum in its key markets, notably China and the United States. All qualities of cognac achieved strong growth.
The Fashion & Leather Goods business group recorded revenue growth of 18 percent in the first half of 2010. Profit from recurring operations increased by 28 percent to €1.2 billion ($1.5). Louis Vuitton registered very strong revenue growth. Asian and European markets confirmed their growth momentum and the United States, which showed good resilience in 2009, continued to improve during the period. Fendi, Donna Karan and the other fashion brands had a good start to the year.
The Perfumes & Cosmetics business group registered revenue growth of 12 percent, and a 50 percent increase in profit from recurring operations, the company said. LVMH’s brands benefited from strong growth in Asian markets and a return of demand in Europe as well as in the United States. By accelerating the development of its star lines, Christian Dior achieved strong growth and gained market share. Beyond the global success of J’Adore, the first half was notable for the progress of Miss Dior Chérie and Eau Sauvage, the leading French male fragrance. In make-up, the new foundation, Diorskin Nude, and the lipstick, Rouge Dior were successful. Guerlain benefited from the 2009 launch of its Idylle perfume and from the growth of Orchidée Impériale. The ongoing success of Ange ou Démon and its major classics were the key highlights for Parfums Givenchy. Benefit and Make Up For Ever enjoyed strong growth.
The Selective Distribution business group saw a 14 percent increase in revenue and recorded growth of 36 percent in profit from recurring operations. DFS benefited from the growth in Asian tourism and saw a considerable increase in revenue. The renovation of the Hong Kong’s Sun Plaza Galleria continued. Macao has seen strong growth and will benefit in the second half of the year from the full opening of the City of Dreams. Sephora performed exceptionally well and strengthened its position in all of its markets. It sustained its growth momentum on a comparable store basis and online sales have continued to grow rapidly. The brand expanded its presence in all markets, and is ready to develop in South America through the acquisition of Sack’s, the leading Brazilian online specialty beauty retailer.
