Sweet swap swoop

28 October 2010 By Pierre Briancon

LVMH’s boss used cashsettled equity swaps in its swoop on Hermès. This crafty technique circumvented French disclosure rules designed to prevent creeping control of public companies. Given similar recent German and Swiss examples, it’s odd France’s watchdog didn’t act sooner.

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LVMH, the French luxury conglomerate, said in a regulatory filing on Oct. 27 that it had acquired most of its 17 percent stake in smaller competitor Hermès International after modifying, on Oct. 21 and 22, equity swap contracts it had entered into in the first half of 2008. Once the originally cashsettled derivative instruments were changed to be settled in shares, LVMH ended up owning 17.1 percent of Hermès.

LVMH also said it was "considering" further acquisitions of Hermès shares, depending on "circumstances and market conditions".

The luxury group had said earlier that it had bought the stake at an average of 80.5 euros a share. Hermès is currently trading at around 160 euros.

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