With LVMH on board to redistribute the shares it holds in Hermès tomorrow in order to end a long-running legal battle between the two luxury firms, here is a look back at how things got to be the way they are for the high fashion rivals …

It’s fair to say LVMH’s “hostile takeover” bid for Hermès came out of the blue. In October 2010, Patrick Thomas, the first outsider to manage the family company, was cycling through France’s rural Auvergne region when his LVMH counterpart, Bernard Arnault, called with a short message: LVMH had acquired a 17 percent stake in Hermès and was planning to buy more – a fact that would be announced to the press in two hours. The first thought that went through my mind, Thomas noted later, was that this was no way to do business in France. It was he insists, “ungentlemanly.”

To the majority of the Hermès family Arnault was an unwanted interloper. He was seen as being ruthlessly aggressive, with a formula for success – mixing glitzy advertising and publicity stunts – entirely unsuited to the Hermès culture. Arnault rejected suggestions that he posed a threat to Hermès’ autonomy and brand, maintaining his only desire was to make the company more profitable. This lure of enhanced personal wealth was seen as a golden carrot for the upcoming sixth generation of the Hermès family. The only way to oppose Arnault,  Thomas reasoned, was by presenting a united family front.

In 1988, Arnault began to buy shares in LVMH. After promising to support Henry Racamier (who took over at LVMH after his mother-in-law in 1977) in a power struggle, he allied himself with rival shareholders gaining enough support to install himself as chairman.

Hermès floated 4 percent of its shares in 1993, increasing the figure to 25 percent. In 2008 Arnault – concealing his actions through financial derivatives – bypassed the legal requirement to declare any ownership above five percent. After the death of former Hermès CEO, Jean-Louis Dumas, in May 2010 the company’s stock value doubled on speculation of takeovers and family dissent. LVMH converted its derivatives, at a roughly 50 percent discount of the actual stock price, adding another 12.1 percent of Hermès shares to the 4.9 percent it already owned.

It was then that Arnault disturbed Patrick Thomas’s country bike ride to inform him of his intent. Thomas responded viscerally. “If you want to seduce a beautiful woman,” he said, “you don’t start by raping her from behind.”

In December 2010 Thomas, supported by 52 key family shareholders, moved to protect the family legacy against any hostile takeover bid by redesigning the ownership structure. He established a holding company that would prevent at least 51 percent of shares from Hermès family members being transferred for the next 20 years. The company would retain the right of “first refusal” in the event any participating family member wished to sell their shares. Most notably, it would limit its voting power regarding the appointment of directors to the Hermès board and top management.

The French stock markets regulator, Autorité des Marchés Financiers (AMF) approved the move which gave 52 family members control of 50.2 percent of the shares and voting rights without having to launch a public tender offer for the whole company. The AMF’s decision was welcomed by Deminor, the leading European company focusing on the rights of minority shareholders, but its French equivalent ADAM (Association de defense des Actionnaires Minoritaires) appealed decrying the ruling as “unjust”. ADAM deemed that because less than 10 percent of shares were now freely floating on the market liquidity was severely reduced, unfairly penalising minority shareholders. It argued all minority shareholders should have the right to a buyout offer.

For a complete timeline of the Hermès x LVMH legal and financial happenings, see it here.