If the Guerrand branch is lively, you can’t really say the Puech branch is any calmer. Because it nearly toppled the discreet empire almost 15 years ago, thanks to Bernard Arnault and another family affair.
At the time, LVMH is on a shopping spree. While buying Hublot, Bulgari, Berluti and Loro Piana, Arnault spends 4 years trying to grab Hermès and builds up a stake of 23.2%.
But in 2014 Axel Dumas makes his rival back down and LVMH ends up distributing its Hermès shares to its own shareholders, with Arnault keeping 8.5% through his family holding company.
Which still leaves one hell of a question: how did our very own Bernie get his hands on Hermès shares, when nearly all of them sit in the family holding company, locked in a partnership structure like those of the Lagardère or Mulliez families?
The answer lies in a 115-page report by the AMF, France’s financial markets regulator. Because for nearly 4 years, the regulator ended up investigating this almighty mess.
Because I skipped quickly through the background: the story starts in October 2010 when Bernard announces he owns 17% of Hermès. The whole family is stunned. Who could have sold their shares? And above all, how could it be done quietly, when the company’s articles require every movement of at least 0.5% of the shares to be made public?
In fact, the story had begun ten years earlier.
As LVMH is wrapping up its dispute with PPR (the future Kering) by selling its 20% of Gucci Group (Gucci, Yves Saint Laurent, Balenciaga, Bottega Veneta, Brino, Boucheron, Sergio Rossi, Sowind), the company quietly and with total opacity acquires 4.9% of Hermès.
Two companies (controlled through Harmony Capital, a Hong Kong company, via LVMH Asia Pacific) based in Luxembourg (Hanibal) and in Delaware (Altaïr) buy 271,428 and 1,495,333 shares respectively. Then Altaïr passes the shares on to Bratton Direction, Ashburry Finances and Ivelford Business, three companies based… in Panama.
A very strange transaction, tucked away in LVMH’s accounts under “other non-current assets”, in breach of international accounting standards according to the AMF.
When Bernard learns in 2006 that Jean-Louis Dumas is seriously ill, he hires the bank Rothschild and the law firm Bredin-Prat to study every possible way of taking control of Hermès.
Every one.
Arnault’s right-hand man, Pierre Godé, is in charge of the operation. The man who had advised Arnault to buy Boussac, then owner of Christian Dior. The man who lent his big house in the south of France for Bernard’s wedding to Hélène Mercier.
Alongside him, Nicolas Bazire, a former Rothschild partner, both a director of LVMH and a member of Rothschild’s supervisory board, but also a senior executive of Groupe Arnault (the future Agache), the famous holding company.
And to gather intelligence for the gang, Bernard Squarcini, the former head of the DCRI, France’s domestic intelligence agency, recycled into private security. It has never been clear whether he started working for LVMH before or after leaving the agency.
Memos are produced in the utmost secrecy. In them, Hermès goes by the Latin name of the messenger of the gods, Mercury. LVMH is called Lithium, a light alkali metal, located at the opposite end of the periodic table from mercury.
And Rothschild concludes:
“All it takes is for the family to fall apart, and if you find a partner family, then the structural balance will shift.”
The dream team goes hunting for heirs.
For that, Squarcini is quite an asset. He pulls strings to flush out those with tricky tax situations, those who might be heading for messy divorces, and more broadly anyone who couldn’t care less who runs a company founded 5 or 6 generations before them.
Naturally, the Guerrands are the first target. Reputation.
When Arnault declares war in 2010, the Hermès heirs, led by Bertrand Puech, create H51 at the end of 2011: the famous family company at the very top of the governance structure.
Bertrand was the one who got Arnault’s call one Saturday morning, two days before the official announcement. Bernie reportedly told him:
“I am delighted that we can now be partners.”
Bertrand is in shock.
The two sides meet shortly afterwards at the Hotel Bristol, on the same street as Hermès, just so nobody has to change street. It’s a clash of civilisations. “We are not from the same world,” growls Bertrand Puech, who discovers that Arnault had been buying shares for several years.9
Several tens of millions of shares are pooled in H51, representing 50.2% of the capital at the time. Julie Guerrand, head of development at Hermès, is appointed chair. Axel Dumas, Bertrand Puech, Axel Dumas, Laurent Momméja, Charles-Eric Bauer and Eric de Seynes sit on the board.
The idea is that each year, a third of the dividends paid by Hermès goes towards buying back shares held by various family members. The AMF even waives the takeover bid that would normally be mandatory. Minority shareholders protest, in vain.
But that doesn’t reassure a family that knows it is being hunted. Several members notice they are being photographed or followed. To the point where any signal, however trivial, sets off a panic.
That is also, in part, what will cost Patrick Thomas his job. Jean-Louis Dumas had told him, practically on his deathbed:
“Everything I have built in thirty years, you are going to destroy.”
All that’s left is to hope H51 works. Especially as the shareholders’ agreement is very restrictive for the fifty or so shareholders:
In December 2011, a swarm of lawyers turns up to explain all this with PowerPoints and luxury catering. In the end, that’s 62.85% of the shares, 80% of them locked up. €8bn at the share price of the time.
By the way, why H51?
H for Hermès.
And 51 as in the 52 heirs of the time.
Yes, 52.
Because one indomitable Gaul still holds out, refusing to put his stash in the common pot.
Nicolas Puech.
Bernard’s brother.
(Puech, not Arnault)