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HomeFT SelectArnault family doubles down on LVMH with Christian Dior buyout

Arnault family doubles down on LVMH with Christian Dior buyout

Billionaire Bernard Arnault and his family are shunning big external acquisitions and opting to tighten their grip on LVMH, the world’s largest luxury group by revenues, where they’re already the largest shareholder.

The Arnault family is simplifying the complex corporate structure between its family holding company Groupe Arnault, Christian Dior and LVMH — in a move that will see it sell out completely of rival Hermès.

“We’re not actively looking at external acquisitions, we’re focusing on internal growth,” Mr Arnault, chairman and chief executive of LVMH, told the Financial Times. “Given the current market, fewer and fewer assets are looking attractive to us. And the best assets are not for sale.”

Mr Arnault’s comments came as the family company Groupe Arnault announced it was buying out the minority shareholders of Christian Dior for about €12.1bn. The Arnault family will offer a mix of cash and shares it holds in Hermès for the stake in Dior, in a deal that values Dior at €260 a share. This represents a 15 per cent premium to above the stock’s closing price on Monday.

Groupe Arnault will then sell the Dior Couture business to LVMH so the whole Dior brand is owned by the LVMH empire. Dior’s fragrance and cosmetics business is already part of the LVMH group. Groupe Arnault said Dior’s couture business had an enterprise value of €6.5bn.

LVMH, the world’s largest luxury group by revenues, said the move was designed to simplify its corporate structure, which had long been requested by the market.

The transaction also reflects Mr Arnault’s view of the luxury sector at a time when valuations are high following a rebound in performance in the past six months or so making potential acquisitions expensive. The sector is recovering from several years of pressure due to a slowdown in consumer spending and declining tourism in Europe after terrorist attacks.

By paying for part of the Dior shares with Hermès stock, Groupe Arnault will eventually sell out of its stake in Hermès, ending a long tussle between the two family groups that began in 2001 when LVMH began building up a stake in Hermès through derivatives. This prompted concern among Hermès’ family owner that LVMH planned to launch a full takeover and sparked legal action. Following intervention by a French court in 2014, LVMH sold its stake, leaving the family holding company Groupe Arnault with a small position in Hermès.

Via FT