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Luxury stocks in fashion
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January 6, 1999: 10:47 a.m. ET
Gucci shares rocket after France's LVMH grabs a stake; bid speculation
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LONDON (CNNfn) - The prospect of a tie up between two of the world's greatest luxury goods houses sent shares in LVMH of France and Italy's Gucci skyrocketing Wednesday.
The gains came after LVMH (PMC) announced it had acquired a 5 percent stake in the Italian fashion firm.
Analysts said an outright bid for Gucci is a real possibility. "Gucci is a good luxury brand and the stock is perceived as having a low valuation. For LVMH to have added this stake at a moderate price leaves it in an excellent position," said Delphine Leroy, cosmetics and fashion analyst at ABN Amro Hoare Govett in Paris.
The news was enough to send LVMH's shares 10 percent higher, forcing them to be suspended limit up. The shares slipped back a little after they were relisted, to stand at 199.5 euros, up 7 percent.
Shares in Gucci, quoted on the Amsterdam stock exchange, were up more than a fifth at one stage, before settling back to 54.7 euros, a rise of 17.3 percent.
LVMH refused to comment on its reasons for buying the holding, except to promise a more detailed announcement in the coming days. Analysts said LVMH must make clear its intentions within 10 days under U.S. SEC rules. Both Gucci and LVMH have listings in New York.
LVMH's play was a no-lose situation, according to Leroy. She added that LVMH boss Bernard Arnault may be close to selling the group's 11 percent stake in Diageo (DGE), worth about $4.5 billion. Gucci is valued at 3.28 billion euros ($3.9 billion).
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LVMH
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