LVMH Buys Stake in Hermes

By Caroline Dobson
Caroline Dobson
Caroline Dobson
October 28, 2010 Updated: October 1, 2015

The French luxury goods firm Hermes' shop taken on October 25, in Paris. LVMH, the world's leading luxury retailer, acquired a 14.2 percent of Hermes International SCA and is likely to increase its holdings to 17.1 percent through equity swaps deals.  (Miguel Medina/Getty Images)
The French luxury goods firm Hermes' shop taken on October 25, in Paris. LVMH, the world's leading luxury retailer, acquired a 14.2 percent of Hermes International SCA and is likely to increase its holdings to 17.1 percent through equity swaps deals. (Miguel Medina/Getty Images)
The world’s largest luxury conglomerate, LVMH Moet Hennessy Louis Vuitton SA, is getting bigger.

This week, the company acquired a 14.2 percent of Hermes International SCA and is likely to increase its holdings to 17.1 percent through equity swaps deals made in 2008, according to a regulatory submission.

LVMH invested 1.45 billion euros ($2 billion), at 80.5 euros per share or 54 percent discount to buy Hermes’ closing share price to the announcement. There has been controversy about how the transaction could have occurred.

The company “foresees buying shares in Hermes International, depending on the circumstances and the market situation,” LVMH said in a statement. “LVMH supports Hermes International’s strategic vision, its growth and positioning.”

The luxury giant has expressed that it does not intend to overtake or control the Paris-based maker of silk scarves and Birkin bags.

The purchase of Hermes shifts LVMH’s dependence away from Vuitton, which, according to Deutsche Bank estimates, accounts for about 55 percent of the company’s profits.

LVMH’s other leather-goods brands, including Fendi, Loewe, and Celine, have lagged Vuitton for many years, according to Luca Solca, an analyst at Sanford C. Bernstein in London.