Handbag war tycoons make uneasy peace to decide on future of Gucci

Click to follow
The Independent Online

A two-year legal war between two of France's wealthiest tycoons ended yesterday with a £560m out-of-court deal which secures the future of the Gucci leather goods company.

If anything, the battle appears to have ended in a bruising draw between François Pinault and Bernard Arnault.

Mr Pinault, 65, owner of Christie's and the Printemps store group, will take control of Gucci, while Mr Arnault, 52, head of Louis Vuitton-Moët Hennessy (LVMH), the world's largest luxury goods group, walks away with a £40m profit and the satisfaction of having made a moral and legal point.

But the wider battle between the two men – the most successful French entrepreneurs of their generation, both of whom turned family businesses into worldwide commercial empires – may be only just beginning. Mr Pinault has made it clear that he will use Gucci as the cornerstone of a luxury goods empire to try to rival Mr Arnault's LVMH.

The two groups announced yesterday that they had reached an amicable settlement of their legal battle in the Dutch courts. Gucci, although originally Italian, is registered principally in Amsterdam.

The dispute began in 1999 when leading figures in Gucci, including its American designer Tom Ford, grew suspicious of the large, minority shareholding which had been acquired by Mr Arnault and LVMH. After rebuffing one takeover attempt, they feared that Mr Arnault intended to add Gucci to his string of luxury brands, ranging from Louis Vuitton to Givenchy.

They increased Gucci's capital and invited Mr Pinault to buy up all the new shares, diluting Mr Arnault's holdings but also those of other shareholders. LVMH challenged this deal in the courts, complaining that Mr Pinault was getting hold of Gucci on the cheap and that Mr Ford and other Gucci figures were getting an "exorbitant" £600m in stock options.

The tycoons were once friends but the Gucci dispute strained relations to the point where Mr Arnault refused to refer to Mr Pinault by name in public. "If that person [ie Mr Pinault] wants to take control of Gucci, he should buy it," Mr Arnault said earlier this year. That, in effect, is now what has happened, with Mr Pinault's principal company, Pinault-Printemps-Redoute, agreeing to buy just over half LVMH's shares in Gucci at a premium.

Mr Pinault has won complete control of Gucci but not in the typically cut-price way he had intended. Mr Arnault now presents himself as a paragon of "shareholder value". And the war of the luxury handbags has no clear winner.