LONDON (CNNfn) - Courtship dissolved into court battle Thursday as LVMH launched a legal action against Gucci. The French luxury goods group wants to block the Italian fashion house from using what LVMH called a "poison pill" to deprive it of voting rights on the Gucci board.
LVMH, owner of Louis Vuitton luggage and drinks brands such as Moët et Chandon champagne, controls 34 percent of Gucci and is keen to strengthen its grip on the Italian company at a time when economic crisis has eroded the market for luxury goods.
But the share-building strategy employed by LVMH over the past two months has drawn a vitriolic retort from Gucci, which has lambasted the French company's tactics as a "creeping takeover."
Gucci chairman Domenico de Sole had challenged LVMH to make what he called a "fair offer" for 100 percent of his company's shares, but LVMH refused.
In response, Gucci set up an employee trust with an option to buy 37 million new common shares. Gucci said the trust immediately purchased 20 million shares, equivalent to the stake bought up by LVMH.
The effect of this action, LVMH said it argued in its legal filing in Amsterdam Thursday was to "dilute shareholders' voting rights without any economic voting benefit to the company."
"Gucci appears intent on using legal trickery as a substitute for sound business practice and shareholder democracy," LVMH said.
Gucci officials could not be reached for immediate comment Thursday.
LVMH contended that Gucci's employee stock-ownership plan was an attempt to "circumvent" shareholders with a "ploy" that has been tried - and failed - in U.S. courts.
In the documents filed with the Enterprise Chamber of the Amsterdam Court of Appeals, LVMH seeks three actions:
It asks the court to order that shares issued by Gucci to the "management-controlled foundation" be deprived of voting rights; that Gucci management's right to exercise further options be immediately suspended; and that the court undertake an investigation into Gucci's management policies, "in light of the Supervisory Board's and Management Board's recent abusive maneuver."
LVMH contends that the trustees appointed by Gucci are "in no sense independent" and will vote against LVMH. The French company alleges that the trustee board consists of two employees and two attorneys for Gucci.
LVMH said it reserved the right to bring other legal actions against Gucci.
Gucci implemented its employee trust plan following a request from LVMH to add an additional member to its eight-member board. Gucci called the request unacceptable.
Gucci defends its stock option plan as a viable way to help counter the LVMH's growing say in the company.
LVMH's lawsuit has been filed in Amsterdam because that is where Gucci shares are listed. Gucci stock rose more than 1 percent to 63.85 euros, while in Paris LVMH shares gained almost 2 percent to 210.5 euros.