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Gucci stalls on LVMH offer
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March 22, 1999: 7:00 a.m. ET
Board to examine second LVMH bid as Pinault considers lucrative exit strategy
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LONDON (CNNfn) - French corporate raider Bernard Arnault moved closer to victory in his pursuit of Gucci Monday when the Italian fashion house agreed to consider a renewed bid for the whole company by LVMH.
Gucci's board rejected Sunday an $85 a share offer by LVMH for the company, conditional on Gucci (GUC) abandoning its sale of a 40 percent stake to Arnault's rival, Francois Pinault. LVMH (PMC) launched a second bid at the weekend with an $81 per share offer for the enlarged share capital, including Pinault's stock.
Gucci said it would consider the new bid because it was open to all shareholders.
The new LVMH bid is conditional on the company securing a majority stake and the termination of Pinault's involvement "at no cost to the company". LVMH would buy out Pinault's stake, acquired at $75 a share, and requires Gucci to drop the planned acquisition of the Sanofi beauty products group from Pinault's Artemis holding company.
Following LVMH's latest offer, Pinault is now mulling his options. Faced with a $240 million gain on his original $3 billion investment in less than a week, analysts expected Pinault to pull back.
LVMH officials have continued their hard line stance against the Gucci board and pursuit of wavering shareholders. The French company claims the rejection of its first bid was contrary to the interests of existing shareholders.
LVMH, whose 34 percent stake would fall to 21.7 percent after Pinault's new shares are included, has secured the support of another 20 percent, including key institutional investors such as Templeton in the U.S, said one analyst. Privately, it has said it may be prepared to raise its bid as high as $90 a share to secure control, though this offer would not be open to Pinault.
Gucci shares climbed 7 percent in Amsterdam Monday to reach 71.5 euros while in Paris LVMH stock slipped back slightly to 232.5 euros.
Gucci officials declined to comment on when the board would respond to LVMH's latest offer.
-- from staff and wire reports
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