Bernard Arnault: Is the wolf in cashmere set to quit drink?
The luxury king may restructure his empire once again, says Laura Chesters
Sunday 25 November 2012
It is a sprawling luxury goods empire that straddles some of the world's best-known designer brands, including Christian Dior, Louis Vuitton and Bulgari jewellery.
But could Bernard Arnault, France's richest man, known because of his smart deal-making as "the wolf in cashmere", be about to radically restructure LVMH? Specifically, some analysts believe the twice-married father of five may be on the verge of turning his company teetotal.
That would involve the long-mooted sale of his drinks business, Möet Hennessy, to concentrate on the better returns he can derive from high-end fashion.
Rumours have been circulating for years that LVMH will eventually sell its 66 per cent stake in the champagne and cognac outfit. The scenario goes that the British drinks giant Diageo, owner of Smirnoff vodka and Tanqueray gin and the other shareholder in Möet Hennessy, will buy out LVMH.
Now a number of City and Paris sources think a deal is looking more likely, following recent complex moves in Mr Arnault's web of holding companies. Industry experts think the next step could happen as soon as next month.
Mr Arnault, 63, the majority owner of LVMH, recently opted for Belgian nationality. Explanations for the decision centred on personal tax and estate planning.
At the same time, a series of company reorganisations including the creation of a Luxembourg holding company called Grandville, which now owns Dior Couture, and the changing of year-ends at some of his other companies have led experts to think a new plan is afoot.
According to Artannes Capital, a financial research firm favoured by the hedge fund community, the creation of Grandville is part of a reshuffling of Mr Arnault's holdings that span three countries. In essence, Artannes argues that Mr Arnault could be planning eventually to spin off Möet Hennessy and sell it to Diageo to minimise any tax leakage, potentially through rolling over any capital gains tax.
Mr Arnault is renowned for his steely determination and stealthy tactics – he recently built up a 22.3 per cent stake in the luxury goods house Hermès under the noses of the founding families.
He had less success during the dotcom era when his Europ@web venture fund backed more than 50 internet start-ups, including one of the most spectacular collapses, the fashion website Boo.com.
Next steps for LVMH, sources claim, could see Mr Arnault's family holdings (companies including Groupe Arnault, Semyrhamis and Financière Agache) upping their stake in the Paris-listed Christian Dior from the current 70 per cent.
That could pave the way for an eventual sale of Möet Hennessy, following further company restructurings. One source predicts that a bid from Mr Arnault for the remaining stake in Christian Dior would come in at more than €150 (£121) a share.
Any signs of a potential sale of the coveted cognac brands that are the toast of the Far East would whet the appetite of other acquisitive drinks businesses, including French giant Pernod Ricard. But with Diageo – which does not comment on market speculation – owning 34 per cent, an auction involving other companies is unlikely. The British drinks giant, which has done deals in India and Turkey this year to chase emerging-market tipplers, would have to tap investors for funds.
An LVMH spokesperson said of a possible sale and increase in its stake in Dior: "These are both themes that crop up every few years. They are without foundation."
In the summer, analysts at Berenberg investment house valued LVMH's 66 per cent stake at €15bn (£12bn), or up to €18.2bn if the holding was sold outright. It's a hefty sum of money for LVMH to reinvest in more luxury brands.
The man behind the labels
Bernard Arnault created the world's biggest luxury goods empire out of a string of mergers and acquisitions that earned him the nickname of "the wolf in cashmere". The Frenchman employs his son and daughter in the business whose brands include Thomas Pink shirts, Bulgari jewellery, Hennessy cognac and Kenzo fashions.
Mr Arnault is well connected in French society and acted as a witness at the former president Nicolas Sarkozy's wedding to his second wife Cécilia.
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