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LVMH targets Gucci guru?
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April 14, 1999: 7:09 a.m. ET
Report: Luxury group says Gucci must retain top designer if bid is to proceed
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LONDON (CNNfn) - LVMH is demanding that creative genius Tom Ford stick with Italian fashion house Gucci, if the French luxury group's $9 billion takeover bid is to proceed, according to a published report Wednesday. Insiders say Gucci is likely to reject the new terms.
LVMH, the owner of luxury goods from Louis Vuitton luggage to Moet et Chandon champagne, has accumulated a 34.4 percent stake in Gucci since the start of the year and wants complete control of the fashion house.
Gucci's chief executive, Domenico De Sole, has repelled what he calls LVMH's "creeping takeover" by issuing new shares to an employee group.
Gucci has also enlisted the help of France's Pinault-Printemps Redoute (PPR). PPR bought new shares in Gucci representing a 42 percent stake in the Italian company, effectively diluting LVMH's financial interest. LVMH has contested these moves, designed to put Gucci out of LVMH's financial reach, in an Amsterdam court.
In a sign of its determination, LVMH last week raised its bid for Gucci by 9 percent to $85. Gucci turned down the raised bid, but said it would entertain future offers.
On Wednesday, The Wall Street Journal reported that LVMH remains willing to make an $85-per-share bid, but only if the deal includes the 42 percent interest held by PPR and if Gucci retains Ford, the Italian group's top creative executive, for at least two years after the offer goes through.
LVMH and Gucci declined to comment to the newspaper, although both companies said they remain open to discussions.
But an insider cited by the Journal, said the conditions looked impossible to fulfill, calling the latest proposal "a non-offer."
People familiar with the matter told the Journal the conditions were essentially irrelevant since Gucci can't speak for PPR and has no authority to force executives to remain at the company.
LVMH seeks $3 billion
In a related development, LVMH is aiming to raise up to $3 billion to help refinance its takeover battle, banking sources told Reuters.
Banks are reportedly bidding for the financing. LVMH is expected to mandate an arrangement within weeks. Euroweek, a weekly European financial journal, said banks close to the mandate include ABN Amro, Chase Manhattan, Citibank, Credit Suisse, First Boston and Goldman Sachs.
LVMH stock was down 3.42 percent at 228.7 euros in Paris Wednesday. Gucci shares rose 2.28 percent to 71.90 euros in Amsterdam.
-- from staff and wire reports
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