Hermes seeks insider trading probe of LVMH

Ask French prosecutors to open a probe into alleged insider trading and share manipulation by larger rival LVMH

A long-simmering feud between two of France's top luxury houses boiled over on Tuesday after Hermes asked French prosecutors to open a probe into alleged insider trading and share manipulation by larger rival LVMH.

LVMH, which owns 22.3 percent of Hermes and has 16 percent of the voting rights, hit back, saying it planned to file a complaint for "blackmail, slander and illegal competition" and repeating its initial stakebuilding was "perfectly regular".

LVMH, led by billionaire businessman Bernard Arnault, has been gradually increasing its holding in Hermes, maker of silk scarves and 10,000 euro leather bags, since it surprised the market in 2010 by saying it had built up a 17 percent stake.

The prosecutor's office said that following a July complaint by Hermes, it had requested the opinion of French stock market watchdog AMF before deciding whether there was a case to open a possible criminal investigation, a spokeswoman for the Paris prosecutor's office said.

Hermes said in a short statement it had filed its complaint on July 10 over LVMH's accumulation of a stake of over 20 percent. A spokeswoman said this was the "logical consequence" of the stakebuilding, but had no further comment.

LVMH, which has always claimed the shareholding was friendly, acquired the Hermes shares through a series of cash-equity swaps. These had not led to shareholding threshold declarations and their use was investigated by the AMF in a probe launched in November 2010.

Analysts queried why Hermes waited so long to file the complaint against LVMH.

"We did not think they had really buried the hatchet, but what is surprising is the timing of the Hermes complaint. Why now?" said one sector analyst, who added it was "hard to draw any conclusion until we have the outcome of the AMF probe"

The AMF declined to comment on the status of its probe or on the complaint filed by Hermes.

LVMH said it was awaiting the outcome of the AMF probe with "total serenity" and argued Hermes was trying to bypass the bourse's police without waiting for the AMF's findings.

Hermes family shareholders have responded to the stakebuilding by creating a majority family holding company that would shield the company from the threat of a takeover.

Hermes shares closed down 1 percent at 227.9 euros and LVMH shares were down 1.7 percent at 127.8 euros.