In October 2010, the fashion world was rocked by a surprise announcement. According to reports at the time, Hermès’ then-CEO Patrick Thomas learned just two hours before the public that LVMH had quietly acquired a sizable stake in the company. He received the news while cycling in the Alps – via a brief phone call from Bernard Arnault, chairman and CEO of LVMH Moët Hennessy Louis Vuitton.
The news was as stunning in form as it was in substance: LVMH, the world’s largest luxury goods group, had built a 17 percent stake in Hermès, a company still largely controlled by its founding families – the Puech, Dumas, and Guerrand clans – who together held more than 70 percent of the business. Thomas, reportedly furious, later described the move in stark terms, stating: “If you want to seduce a beautiful woman, you don’t start by raping her from behind.”
The next four years would usher in an aggressive legal and regulatory battle between LVMH and Hermès, culminating in fines, court interventions, and eventually a forced divestment. Here’s a timeline of one of the fashion industry’s most dramatic corporate standoffs – what Thomas once called “the battle of our generation.”
LVMH is believed to have acquired a small initial stake in Hermès, below the 5 percent disclosure threshold under French securities law.
LVMH resumed quietly accumulating Hermès shares through equity derivatives and financial intermediaries, each maintaining individual holdings below 5 percent. At the time, such equity swaps allowed investors to gain economic exposure without triggering immediate public disclosure – exploiting a legal gray area in French financial regulation.
LVMH publicly disclosed that it had amassed a 14.2 percent stake in Hermès. Much of this position was secured via cash settlement of derivatives, enabling the group to avoid earlier disclosure. LVMH executives insisted the move was a passive financial investment and denied any intent to take control. LVMH Vice Chairman Pierre Godé said: “It would be folly on our part to hamper the success of this great brand. LVMH has no intention of aggressively taking control of Hermès. I make the wish that these artificial, sterile and groundless quarrels stop.”
The Autorité des marchés financiers (AMF), France’s financial regulator, launched an investigation into the legality and timing of LVMH’s accumulation of Hermès shares.
Hermès responded by creating a family holding company (H51), which pooled 50.2 percent of the company’s shares and gave founding family members right of first refusal should any shares come up for sale – effectively ringfencing the group against a hostile bid.
The AMF formally granted the Hermès family group an exemption from French tender offer rules, allowing them to pool their shares without being required to offer to buy out minority shareholders – a legal move that further insulated the company from a potential LVMH takeover.
Hermès CEO Patrick Thomas publicly condemned LVMH’s stealth tactics in acquiring 20 percent of the company, reiterating his earlier metaphor and asserting there was “no interaction between LVMH and us. We don’t plan to have any.”
Hermès Chairman Bernard Puech publicly called on LVMH to cut its stake in half and denounced LVMH’s “friendly” approach: “With friends like these, who needs enemies?”
LVMH disclosed that it had increased its stake in Hermès to 22.6 percent.
Hermès filed a criminal complaint in Paris, accusing LVMH of insider trading, collusion, and stock price manipulation in connection with its stealth accumulation of shares. LVMH responded: “By filing its complaint, Hermès seeks to bypass the appropriate AMF channels… and makes serious and unfounded accusations.”
LVMH countered with its own legal filing, accusing Hermès of blackmail, slander, and unfair competition.
The AMF announced that it had found evidence of wrongdoing and formally referred the matter to its sanctions committee.
Bernard Arnault, at LVMH’s annual meeting, claimed the Hermès investment had been “unexpected.” He said, “We made a financial investment… that had an outcome we had not expected.” The comment was later contradicted by AMF findings.
The AMF concluded that LVMH had secretly acquired its stake in Hermès through derivatives with the deliberate goal of amassing influence – not merely for financial gain.
The AMF held hearings to determine whether sanctions should be imposed on LVMH for insider trading and disclosure violations.
Hermès announced Axel Dumas, a sixth-generation family member, would become co-CEO alongside Patrick Thomas, who planned to retire in 2014.
Hermès filed a new lawsuit seeking cancellation of the equity swaps LVMH used to acquire shares, calling it “the largest fraud in the history of the French stock market.” Hermès sought to unwind the swaps and return shares to three banks – Société Générale, Natixis, and Crédit Agricole.
LVMH countersued an Hermès executive for public remarks about alleged fraud.
The AMF Sanctions Committee fined LVMH €8 million (approximately $10.4 million) for failing to disclose its stake-building activities in a timely manner.
LVMH confirmed its total stake in Hermès had increased slightly to 23.1 percent.
LVMH announced that it would not appeal the AMF ruling, stating that further proceedings would “interfere with the sound management of [its] investment in Hermès.”
Under a court-mediated agreement, LVMH agreed to distribute its 23 percent stake in Hermès to shareholders and institutional investors. Both sides pledged not to acquire further shares for five years. From a joint statement: “Hermès Executive Chairman Axel Dumas and Bernard Arnault both express their satisfaction that relations between the two groups… have now been restored.”
LVMH filed regulatory documents outlining the mechanics of its planned divestiture.
LVMH confirmed that, pending board approval, it would distribute its Hermès shares on December 17. Dior, which received some of the shares, would also transfer them to its own shareholders.
LVMH officially completed its exit from Hermès, distributing the 23 percent stake – then worth approximately $7.5 billion – to shareholders and institutional investors. The Arnault family retained less than 10 percent.
Hermès became a civil claimant in a criminal case against Bernard Squarcini, former head of French domestic intelligence. Squarcini was accused of orchestrating surveillance of Hermès executives during the takeover battle, allegedly on behalf of LVMH.