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Court bottles LVMH bid
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March 3, 1999: 6:51 p.m. ET
French firm won't seek Gucci board seat after Dutch panel delays decision
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NEW YORK (CNNfn) - LVMH said Wednesday it has scrapped plans to put a representative on the board of takeover target Gucci, after a Dutch court put off a decision in the war for control of the Italian fashion house.
The French luxury goods maker launched a legal assault last month to block Gucci's effort to issue new shares to its employees, a move that would dilute LVMH's 34 percent stake in the company.
The Dutch court Wednesday delayed a final decision on the dispute over Gucci's so-called "poison pill" maneuver until after April 22, in the hope the two sides could strike a deal.
LVMH had called for a special meeting of Gucci's board on March 23 and had planned to put forward its own nominee to the board of the Italian fashion house.
Both sides appeared to claim some victory from the court's deferral. The lawsuit is being heard in Amsterdam because Gucci shares are listed there.
"The court indicated that it believes Gucci's actions, which dilute shareholders' voting rights without any economic benefit to the company, might be contrary to mandatory Dutch law." LVMH said in a statement.
"In light of the action taken by the court today ... we have decided to withdraw our proposal for the election of an independent member of the Gucci supervisory board," the statement said.
There were few signs LVMH is ready to shelve entirely its plan to land a board seat. "We intend to review all options available to us, including resubmitting the proposal for an independent director, once the court has made its final ruling on this important issue," LVMH said.
In its own statement following the court's delay, Domenico De Sole, president and chief executive officer of Gucci, also appeared to derive some hope from the deferral.
"By freezing the voting rights of both LVMH and (Gucci's) employee trust, today's decision by the court will ensure that the voice of our independent shareholders will be heard at the extraordinary general meeting of shareholders on March 23," De Sole said in a statement.
LVMH, owner of Louis Vuitton luggage and brands such as Moët et Chandon champagne, is keen to strengthen its grip on the Italian firm at a time when economic crisis has eroded the market for luxury goods.
Prior to the announcement Wednesday, American depositary receipts of LVMH Moet Hennessy Louis Vuitton (LVMHY) lost 1/8 to 42-1/8, while Gucci (GUC) fell 1-3/16 to 67-1/16.
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