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

Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreEXCLUSIVE The Shakespeare play that proved too much for more than 100 people
News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Arts and Entertainment
booksThe best children's books for this summer
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs his surreal series returns, the comedian on why mainstream success scares him and what the future holds for 'The Boosh'
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
music‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do 'The Independent’s' experts think he’s missed out?
Sport
Colombia's James Rodriguez celebrates one of his goals during the FIFA World Cup 2014 round of 16 match between Colombia and Uruguay at the Estadio do Maracana in Rio de Janeiro, Brazil
sportColombian World Cup star completes £63m move to Spain
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
News
news
News
i100
News
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Antoine Griezmann has started two of France’s four games so far
sport
Life and Style
techYahoo Japan launches service to delete your files and email your relatives when you die
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
News
i100
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

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary