gucci-lvmh takeover battlement

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CAEA 3231 CAEA 3231 Integrated Case Study Integrated Case Study Group Members: KOK KEAN TEONG CEA070059 MOH JIA WEI CEA070084 NEO CHING HUP CEA070109 ONG KAH HOEY CEA070157 TEO SILK KEONG CEA070197

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Group Members: KOK KEAN TEONG MOH JIA WEI NEO CHING HUP ONG KAH HOEY TEO SILK KEONG

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Page 1: Gucci-LVMH Takeover Battlement

CAEA 3231 CAEA 3231 Integrated Case StudyIntegrated Case Study

Group Members:

KOK KEAN TEONG CEA070059

MOH JIA WEI CEA070084

NEO CHING HUP CEA070109

ONG KAH HOEY CEA070157

TEO SILK KEONG CEA070197

Page 2: Gucci-LVMH Takeover Battlement

The Battle of TakeoverThe Battle of Takeover

Page 3: Gucci-LVMH Takeover Battlement

Introduction of TakeoverIntroduction of Takeover

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Friendly TakeoverFriendly Takeover

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Hostile TakeoverHostile Takeover

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Hostile TakeoverHostile Takeover

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Procedures Involved in TakeoverProcedures Involved in Takeover

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Hostile Takeover Defense Hostile Takeover Defense StrategiesStrategies

Page 11: Gucci-LVMH Takeover Battlement

IntroductionIntroduction

Gucci Group NV (Target Company)◦Italian company ◦Incorporated in Netherland ◦Sells French Fashions◦CEO: Prior 2004> Mr. Domenico De Sole◦2004 until now>Mr. Robert Polet◦Stocks traded on NYSE and Amsterdam Stock

Exchange

Page 12: Gucci-LVMH Takeover Battlement

IntroductionIntroduction

LVMH Moet Hennessy Louis Vuitton SA (Attacker)◦World largest luxury group◦French company ◦Incorporated in Paris◦Sells French Fashions◦CEO: Mr. Bernard Anault ◦Stocks traded on Nasdaq Stock Market Trading

and Paris Stock Exchange

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IntroductionIntroduction

PPR-Pinault Printemps Redoute SA ( White Knight)◦World 3rd largest luxury group◦French company ◦Incorporated in Paris◦Europe largest non food retail group◦CEO: Mr. Francois Pinault◦Stocks traded on Paris Stock Exchange

Page 14: Gucci-LVMH Takeover Battlement

History: 1923-1989History: 1923-1989

1923-1953

Page 15: Gucci-LVMH Takeover Battlement

History: 1989-1995History: 1989-199550% 50%

19931995- Go Public

Page 16: Gucci-LVMH Takeover Battlement

The Start of the Battle (1999)The Start of the Battle (1999)

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The Start of the Battle (1999)The Start of the Battle (1999)

Page 18: Gucci-LVMH Takeover Battlement

Ways to amass 34.4% of stakeWays to amass 34.4% of stake

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The Start of the Battle (1999)The Start of the Battle (1999)

Page 20: Gucci-LVMH Takeover Battlement

The Difference Regulations The Difference Regulations between Countriesbetween Countries

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The Start of the Battle (1999)The Start of the Battle (1999)

Page 22: Gucci-LVMH Takeover Battlement

Analysts’ ViewAnalysts’ View

Reasons to take control over Gucci:◦LVMH damaged by turmoil in Asia and losses at

its retail division

◦Gucci is seen as undervalued, strongly managed, and having potential growth

◦Gucci is geographically attractive

◦Gucci has higher % of sales in US

Page 23: Gucci-LVMH Takeover Battlement

The Real ReasonThe Real Reason

Page 24: Gucci-LVMH Takeover Battlement

The Start of the Battle (1999)The Start of the Battle (1999)

Page 25: Gucci-LVMH Takeover Battlement

The Start of the Battle (1999)The Start of the Battle (1999)

Page 26: Gucci-LVMH Takeover Battlement

The Standstill Agreement between The Standstill Agreement between PPR and GucciPPR and Gucci

Strategic Investment Agreement◦PPR is allowed to increase stake to 42% and

disallowed to increase any stake >42% in 5 years time

◦PPR is allowed to increase max 10.1% stake if LVMH increase its stake in Gucci

◦If LVMH launch full bid, PPR has option to sell all shares or offer higher bid to buy Gucci

◦Gucci can acquire Yves Saint Laurent and other perfume Lines from PPR for $ 1 billion

Page 27: Gucci-LVMH Takeover Battlement

The Process of Full Takeover BidThe Process of Full Takeover Bid

Page 28: Gucci-LVMH Takeover Battlement

Court’s DecisionCourt’s Decision

Gucci is guilty for mismanagement in terms of timing (article 2:8 of the civil code )

ESOP is invalid

PPR’s 42% stake in Gucci is valid

Page 29: Gucci-LVMH Takeover Battlement

Dutch Supreme Court’s DecisionDutch Supreme Court’s Decision

held that the enterprise chamber was wrong in finalized any decision without an official inquiry

The chamber then appointed 2 Dutch Lawyers and a former CEO of a large financial institution as official investigators

Page 30: Gucci-LVMH Takeover Battlement

Peace NegotiationsPeace Negotiations

LVMH, Gucci and PPR met at offices at Darrois Villey in Paris

Came out with a settlement agreement and revised Strategic Investment Agreement

Page 31: Gucci-LVMH Takeover Battlement

The Settlement AgreementThe Settlement Agreement

PPR spent $812 million to buy 8.6 million shares from LVMH at a price of $94 per share (a $2 premium) and making PPR own 53.2% of Gucci

A special dividend of $7 per share will be given to all shareholders except PPR

PPR will buy all shares which does not belongs to PPR at $101.50 in 2004

PPR has the right to a majority of the board and designate the chairman after the completion of the offers in 2004

LVMH will forgo all of the legal claims against Gucci and PPR

Page 32: Gucci-LVMH Takeover Battlement

The End of the Battle (2001)The End of the Battle (2001)

LVMH – capital gain of 760 million euro

Gucci- no longer under attack and able to do a lot of acquisitions

PPR- able to get full control over Gucci in 2004

Page 33: Gucci-LVMH Takeover Battlement

Changes in Structures Prior and Changes in Structures Prior and After the Takeover ProcessAfter the Takeover Process

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Share PriceShare Price

Source: Moneycentral.msn.com

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Share PriceShare Price

Share Price: Annual 2002-1998

Year  NYSEHigh  

US$Low  

EuronextAmsterdam

High  €

Low2002   99.4  82.5  110.9  83.92001   94.7  66.7  109.1  66.52000   116.2  72.9  122.0  81.41999   121.5  61.0  121.9  56.61998   75.3  31.5  65.0  26.1

Source: SEC report on 31/7/2003

Page 36: Gucci-LVMH Takeover Battlement

Capital StructureCapital Structure

IAS Financial Data of Gucci 1998-2000 (in Euro Million)

Source: SEC report on 31/7/2003

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Top ManagementTop Management

Name   Position   Age  

Year of Initial

ElectionDomenico De

Sole  Chairman   59   1995

Tom Ford   Vice Chairman   41   2002

Aart Cooiman   Member   61   1995

Members of the Management Board (July 1, 2003):

Page 38: Gucci-LVMH Takeover Battlement

Top ManagementTop Management

Name   Position   Age  Year of Initial

ElectionAdrian D.P. Bellamy   Chairman   61  1995Patricia Barbizet  Member   48  1999Aureliano Benedetti   Member   67  1995Reto F. Domeniconi  Member   67  1997Patrice Marteau  Member   55  1999François Henri Pinault  Member   40  2001Karel Vuursteen   Member   61  1996Serge Weinberg   Member   52  1999

Members of the Supervisory Board (July 1, 2003):

Page 39: Gucci-LVMH Takeover Battlement

Business StructureBusiness Structure

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Business StructureBusiness Structure

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Corporate Financial PerformanceCorporate Financial Performance

Revenue (Euro Million)

Source: SEC report on 31/7/2003

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Corporate Financial PerformanceCorporate Financial Performance

Operating Profit (Euro Million)

Source: SEC report on 31/7/2003

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OwnershipOwnership

Name  

No. of Shares

Beneficially Owned  

Percent of Outstanding

Share Capital  

Pinault-Printemps-Redoute S.A. 64,233,996 64.6 %

Crédit Lyonnais S.A. 11,484,609 11.5 %

Share Ownership (as a % of shares outstanding on July 1, 2003)

Source: SEC report on 31/7/2003

Page 45: Gucci-LVMH Takeover Battlement

Analysis of Similar Major Analysis of Similar Major Takeover That Wasn’t Takeover That Wasn’t

SuccessfulSuccessful

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Page 47: Gucci-LVMH Takeover Battlement

Impact of Takeover Failure to Impact of Takeover Failure to IndustryIndustry

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Impact of Takeover Failure to Impact of Takeover Failure to EconomyEconomy

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ConclusionConclusion

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