LVMH fined 8m euro over Hermes stake-building

PUBLISHED : Tuesday, 02 July, 2013, 11:53am
UPDATED : Tuesday, 02 July, 2013, 11:59am

France’s markets watchdog AMF on Monday fined luxury-goods group LVMH 8 million euros (HK$80.9 million) for failing to properly disclose its stake-building in rival Hermes before 2010.

While not as high as the maximum 10 million-euro fine that could have been imposed, the ruling comes as a victory for Hermes - the 175-year-old maker of Birkin and Kelly handbags - in its fight to punish LVMH for secretly building up a its 14 per cent stake, which was later raised to 22.6 per cent.

LVMH immediately said it planned to appeal the fine and the principle of the punishment, which it said were “unfounded”.

The AMF’s enforcement committee condemned the “unusual” way LVMH had amassed its shares, buying equity swaps with a number of banks so as to avoid disclosure requirements and using foreign subsidiaries that were not listed as consolidated units until its 2010 annual report.

Taken in isolation, LVMH’s equity swaps were within the rules, the AMF committee said. But its overarching view was that LVMH should have made public its settling of the swap contracts for shares in June 2010 - four months before its first announcement.

The AMF cited the “seriousness of the successive breaches of public disclosure requirements, which consisted in concealing each stage of LVMH’s stake-building in Hermes”.

The rest of the battle has yet to be played out, as Hermes last month launched a fresh round of legal proceedings against its arch-rival to obtain the outright cancellation of the equity swaps used by LVMH.