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Rising Hermes stock fuels takeover speculations

The stock of family-controlled luxury group Hermes has risen to a seven month high, causing speculation that rival family company LVMH is buying more Hermes shares.

The stock of family-controlled luxury group Hermes has risen to a seven month high, causing speculation that rival family company LVMH is buying more Hermes shares.

Hermes stock rose to a high of €207.75 per share on 7 June – trading at 35 times its 2012 earnings, pushing up its market capitalisation to around €20 billion. This valued the group higher than some of France’s biggest companies including Michelin and Airbus.

The rise in share price has fuelled rumours that LVMH, headed by Bernard Arnault, is buying more shares in Hermes to increase its current 21% stake in the company.

But Joachim Schwass, professor of family business at Lausanne, Switzerland-based IMD, disagrees. He told CampdenFB: “There are talks of a shift in long-term ownership of Hermes – from the current sixth generation to LVMH. But the media is simply pumping up the story. Obviously the market capitalisation is not warranted, but everything else is purely speculation.”

LVMH’s stake was built secretly and announced in October 2010 by Arnault, who in May this year said that he will remain a long-term shareholder in Hermes.

Following Arnault’s stake building, the Hermes family retaliated by creating a shareholding pool to avoid any possible takeover by the much larger business. The holding company was formed by 52 of the 53 members of the founding family who directly own Hermes shares, but has met with opposition from minority shareholders (Continue reading here)

Founded in 1837 by Thierry Hermes, family member Bertrand Puech serves as executive chairman, while non-family Patrick Thomas is chief executive of Hermes. The company first listed in 1993 as a way for family shareholders to exchange shares more easily.

The Paris-based group had 2010 revenues of €2.4 billion, up from €1.9 billion the year before.

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