Outlook: Gucci rumpus

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The Independent Online
QUESTION. Which country has the most heavily regulated financial markets in the world? To believe the scare stories and comment in some of our rivals, you might think it is the UK with its new Financial Services Authority - depicted by some as a bureaucratic monster destined to sink the City under a mountain of red tape and oppressive rulemaking.

But actually it is the United States, land of the free, where literally tens of thousands of people find gainful employment crawling all over any financial transaction that moves. On top of them there is an even larger army of busy bodies ensuring that their organisations comply with the rules. And on top of them there is a whole platoon of lawyers, whose job it is to safeguard the interests of paying clients by ensuring that others abide by the rules. In the UK we try our hardest, but when it comes to regulation, we've got nothing on the US.

The same point might be made about hostile takeovers. The easiest place in the world to make a hostile takeover bid is not, perhaps surprisingly given its free market rhetoric, the United States, but the UK. In the US it has become virtually impossible to make hostile bids. Highly effective poison-pill arrangements that would be regarded as a gross infringement of shareholder rights in this country abound in the US, as they do almost everywhere apart from here; those that don't have them can buy them off the shelf.

Meanwhile, deep in the airbrushed, "darling you look wonderful" world of the designer handbags and pounds 100 scarfs, things have turned ugly.

LVMH has been accused of "takeover by stealth" after its chairman Bernard Arnault built a 34.4 per cent stake in Gucci with no suggestion that he would make a full bid. Yesterday Gucci put the designer boot in by issuing a thumping 37 million new shares, diluting Arnault out of sight and pledging to issue more if he increases his stake. It's a catwalk stand-off.

None of this could happen here: but Gucci is quoted in Amsterdam and New York - not Britain. In Holland there are no "trigger rules" which force a predator to make an offer for the entire share capital once the stake goes over 29.9 per cent. Instead the Dutch allow companies to defend themselves by issuing new shares which dilute the predator's voting rights. Sacre bleu!

If it didn't come from Bernard Arnault, this expression of outrage might carry a little more weight. Mr Arnault has made a habit of trying to garner control of businesses without paying for the whole lot. The idea is to use a powerful minority position to put his placemen on the board and have an input on strategy at arms length.

That is exactly what he was suggesting at Gucci, where he was nominating three new directors and some "commercial proposals" for the board to consider. As with the Guinness-Grand Metropolitan deal, which Mr Arnault tried to block, all this is only heading in one direction. To the courts. Thank goodness for Britain's quaint old system of Takeover Panel and Code.