Families will feud. They will feud between themselves and with other families. These feuds can get pretty nasty, and when there’s money and power involved the nastiness often gets aired in public.
So it is with two of France’s most powerful families – the 70-plus family members behind Hermes and the Arnaults, or more specifically, the patriarch, Bernard Arnault. Arnault and his family control more than 40% of the world’s biggest luxury products business, LVMH.
The maker of Louis Vuitton bags is big because Arnault knows how to do deals – better than anyone else in the world of luxury. He particularly likes buying luxury businesses that are family-controlled, because he equates the two with quality and brand value. Arnault’s bought the Italian family-controlled jeweller Bulgari and family-run champagne house Krug – to name a few.
Most of these families roll over and acquiesce to Arnault’s fat cheque book and sell. But not so with Hermes. This is where the feud begins. LVMH won’t admit it, but everyone close to the world of luxury knows that the luxury conglomerate wants to buy Hermes. It’s been buying Hermes shares in the last few years and now owns more than 22% of the maker of the Birkin and Kelly bag.
The last two years have been splattered with claim and counter claim by the two luxury businesses as they fight to gain the upper-hand. Hermes has done everything it can to protect the family’s shareholding, and now has even brought in a family chief executive to replace non-family Patrick Thomas. To Hermes, family is everything. But that’s not stopped the predatory LVMH, which continues to circle Hermes menacingly – at least that’s how Hermes sees it. It seems that the more “family” it becomes, the more Arnault wants it.
This week Hermes has ratcheted up the fight again by filing a legal suit relating to LVMH’s purchase of its shares in 2010. Arnault’s outfit has counter-sued for defamation.
Whatever the outcome of the legal wrangling between the two, what’s pretty certain is the fight between them isn’t going to stop in the courts. Hermes looks determined to remain independent while LVMH looks equally determined to buy Hermes' stake.
A huge boom in the demand for their luxury products in the emerging markets in the last five years means that they have the wherewithal to launch and fend off attacks. That can’t last forever, but in the meantime be entertained by one of the most intriguing inter-family business rivalries anywhere.