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Pinault, LVMH vie for Gucci
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March 19, 1999: 1:16 p.m. ET
LVMH makes full bid after French raider grabs $3B stake, transfers $1B YSL unit
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LONDON (CNNfn) - Gucci confirmed its status as Europe's most hotly-contested takeover target Friday and sparked a battle between France's two leading corporate raiders, Francois Pinault and Bernard Arnault of LVMH.
Pinault appeared to have plucked the Italian fashion group from Arnault's hostile advances with a deal to buy 40 percent of Gucci for $75 a share. Within hours LVMH responded with its own conditional bid for 100 percent of the Italian company at $85 a share, a 27 percent premium on Friday's close.
LVMH has consistently denied it was seeking complete control of Gucci but said it was bounced into the offer by Gucci's actions. "Gucci have diluted their shares twice without consulting shareholders," an LVMH official told CNNfn. "There is great disappointment that we have negotiated in good faith while Gucci went behind our backs in bad faith."
Gucci and Pinault shocked LVMH Friday morning when Gucci agreed to issue $3 billion in new shares to Pinault-Printemps Redoute, the French retailer controlled by Pinault's holding company, Artemis. The deal gives Pinault a 40 percent stake in Gucci and dilutes the 34.4 percent stake built up by LVMH (PMC) in Gucci to 20.7 percent, said analysts.
The LVMH counter-offer will be discussed by Gucci's board Sunday and is contingent on the cancellation of the planned capital increases for Pinault and an earlier increase to an employee foundation used as a poison pill.
LVMH ended talks with Gucci in Amsterdam Friday after just 30 minutes "with no progress". The two sides had agreed to meet to solve a dispute after LVMH launched a lawsuit in February alleging Gucci (GUC) was using "legal trickery" to frustrate the French group's bid for board representation.
LVMH officials hadn't been informed of Pinault's involvement -- said to have been in progress for 10 days -- and were furious at the latest development, which sees Pinault gain a majority on Gucci's financial and strategic committees. It plans to take Gucci back to Amsterdam's commercial court.
Pinault's Artemis unit announced an agreement Friday to buy the beauty products unit of France's Sanofi for six billion French francs ($1.01 billion) and sell it to Gucci for the same price. The Sanofi unit includes international perfume brands such as Yves Saint Laurent, and boosts Gucci's strong lineup.
LVMH has demanded the sale be suspended as a condition of its offer for Gucci.
Sanofi (PSW), a subsidiary of Elf Aquitaine, has struggled to unload the beauty unit since agreeing to a merger with Synthélabo (PSD) last December that will see the two groups focus on their core pharmaceuticals business. Sanofi's attempt to sell the unit to LVMH broke down at the end of last year.
Analysts said the price was at the top end of the range proposed by Sanofi last year and includes more than 1 billion francs in debt. However, Gucci should be able to wrest cost savings from synergies in marketing and brand management.
Pinault-Printemps has a strong international distribution business in the luxury goods sector and is one of France's largest retailers. It said it will not increase its Gucci stake for five years.
Gucci's move and the wrangling between Olivetti and its bid target, Telecom Italia, highlights just how far European companies have advanced in launching and defending hostile bids which, just a year ago, were regarded as almost unthinkable.
-- from staff and wire reports
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