However, LVMH last night turned the tables on Gucci by offering to launch a full takeover bid for the company - thought to be worth more than $5bn (pounds 3.1bn) - if it abandoned its agreement with Mr Pinault. Gucci immediately called a board meeting for Sunday to consider LVMH's offer.
Gucci stunned the markets when it unveiled its alliance with Mr Pinault. Under its terms Pinault-Printemps-Redoute, the department store group 50 per cent owned by Artemis, M Pinault's private company, will inject $3bn into Gucci in return for a 40 per cent shareholding.
The deal, which values Gucci shares at $75 each and the company's existing assets at $4.5bn, was welcomed by the market, sending Gucci's and other luxury good stocks around Europe soaring.
The two companies said the deal would give Gucci the financial strength to pursue acquisitions in the luxury goods market, while Pinault would gain an exposure to a fast-growing industry.
In a related move, Artemis announced plans to buy the Sanofi beauty products business, which includes the Yves Saint Laurent clothing and cosmetics brand, for $1bn and immediately said it planned to sell the business on to Gucci.
Gucci's move was clearly designed to frustrate LVMH, which has built a 34.4 per cent stake and pressed for representation on the Gucci board. If the Gucci-Pinault deal goes ahead LVMH will see its stake diluted to around 22 per cent.
LVMH attacked the alliance, arguing that Gucci was handing control of the company to Mr Pinault without mounting a full bid. The French group applied to the takeover court in the Netherlands, where Gucci is registered, to have the deal blocked. The court is expected to rule on Monday.
Hours later, however, LVMH raised the stakes again by announcing it would mount a full takeover bid for Gucci if it abandoned its deal with Pinault. LVMH did not reveal the terms of the offer, made in a letter to Gucci's board, but it is thought to be pitched at $85 per share. The Gucci board is expected to consider the offer on Sunday.
A key personality in Gucci's future is likely to be Tom Ford, the designer credited with reviving its fashion credentials. Gucci had previously suggested that any change of control of the company would allow Mr Ford and chief executive Domenico de Sole to leave with huge golden parachutes.
Yesterday's events are an escalation in the battle between LVMH and Gucci. Last month, Gucci attempted to see off Mr Arnault by issuing 20 million new shares and lodging them in an employee share trust.
LVMH challenged the move, which would have diluted its shareholding. A Dutch judge ordered the two companies to sort out their differences - a process that had been due to begin with a meeting yesterday.
Gucci insists yesterday's move, and the decision to issue shares, are allowed by Dutch takeover laws, which allow companies to fend off bidders through "poison pill" defences.