Golden parachute waits as Gucci weighs up rival bids

THE STRUGGLE for control of luxury goods maker Gucci is expected to reach fever pitch later today as the company's supervisory board meets in Amsterdam to discuss whether it should accept LVMH's $5bn (pounds 3bn) takeover bid.

Gucci chief executive Domenico De Sole and his chief designer Tom Ford stand to collect gigantic "golden parachute" packages if they choose to leave the company. Mr De Sole's severance package is estimated at $20m, but there has been speculation that if his options are triggered and all other benefits are taken into consideration, the final figure could be nearer $100m. A Gucci spokesman said yesterday that such speculation was absurd and "20 per cent of the higher figure would be nearer the mark".

Others say, however, that the $20m figure is merely a severance package. Under Italian law details of De Sole's contract are shrouded in secrecy.

Bernard Arnault, chairman of LVMH, has been forced to up his bid for 35 per cent of Gucci to 100 per cent to stop Francois Pinault, the French billionaire, taking a 40 per cent stake for $2.9bn, or $75 a share.

Mr Arnault said he was "sure" his bid would succeed because the money he is offering is "exactly the amount asked for by De Sole when he discussed the hypothesis". He did not think Pinault-Printemps-Redoute, the French retail giant, or "anyone else" would be ready to top his offer.

If the LVMH offer is rejected, LVMH plans to ask the courts in Amsterdam, where Gucci is listed, to freeze or halt PPR's agreement with Gucci and suspend all members of Gucci's supervisory board and place an independent person in charge of the company on Monday.

The issue of 39 million Gucci shares to PPR on Friday gives it twice as many shares as LVMH. Sources close to Mr Arnault believe that Adrian Bellamy, Gucci's chairman, will encourage the board to accept the LVMH offer, at $85 a share, valuing Gucci at $5.07bn.

From the beginning, say LVMH sources, Mr De Sole wanted it to take a 100 per cent stake in the company. It is thought that Mr Pinault was encouraged to become involved in order to put pressure on Mr Arnault to make a counter offer at a higher price. But according to Gucci sources, the company's board has already approved the transaction of PPR.

Cedric Magnelia, a broker at CSFB, is advising key shareholders in Gucci, Templeton and Scudder, that "at this price it is LVMH's company". The trouble is that PPR's acquisition of 40 per cent of Gucci is a done deal. "The board has a fiduciary duty to act in the best interests of shareholders," said Mr Magnelia. "If they decide to accept the LVMH offer, they have to nullify the PPR deal which is already a fait accompli and could therefore be legally difficult. To get it through the courts, the board would have to recommend that they have a sure offer, it is at a premium to the value of the company and it should be accepted."

The Italian fashion house offers good potential to shareholders. Mr De Sole, an Italian educated at Harvard Law School, has turned it around since being appointed chief executive in 1994. He took the company public the following year, after bringing in Mr Ford as creative director. The two embarked on a successful three-year drive to boost profits and regain control of the brand, which had been degraded through over-use

In purely financial terms, their success has been staggering: from turnover of $260m in 1994 to $1bn last year. Net profits rose in the same period from $17m in 1993 to $195m last year, a feat made even more remarkable given the damaging effect of the Asian crisis on the luxury goods sector.

It has always been part of Mr De Sole's and Mr Ford's strategy to change Gucci from a single to a multi-brand luxury goods group. But Mr De Sole opposed LVMH's 34 per cent stake in the company, which he saw as creeping control without forking out a premium. "Having our principal competitor all over us was not a comfortable experience," said a Gucci insider.

LVMH, which owns a range of companies from Louis Vuitton luggage to Moet & Chandon champagnes, has suffered much more from the slump in the world economy. Its strategy has been to focus on regaining control of its distribution. To that end, LVMH bought 61 per cent of DFS Group, a 150-store chain of duty-free shops; Sephora, a European cosmetics chain; and Marie-Jeanne Godard, a 75-store French perfume chain.

The company was criticised for over-paying for DFS as the Asian economies went into crisis. But Mr Arnault believes that as Asia recovers, the $2.47bn deal will be seen as visionary.

WAR WAGED WITH HANDBAGS, PAGE 3

Start your day with The Independent, sign up for daily news emails
Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas