Handbags fighting

So what if LVMH sought control of Hermes?

Luxury magnate Bernard Arnault started acquiring a 14 per cent stake in Hermes almost 10 years before he revealed it in 2010. That - and the complex methods used by Arnault to skirt around French disclosure rules - is the main revelation of an imminent report by Autorite des Marches Financiers (AMF) on how Arnault-controlled LVMH crept up on its smaller rival, Le Monde reported.

France's richest man seems to have used many regulatory loopholes to outwit the controlling Hermes family, who deemed his stake-building hostile when it first came to light. Shell companies, tax heavens and complex derivatives were involved, the AMF is to say. LVMH intends to challenge the findings. The French regulator has yet to decide whether LVMH's behaviour deserves punishment. At most, it could inflict a slap on the wrist, and this won't change much to the current standoff in Hermes' share register.

LVMH today owns more than 22 per cent of the high-end leather-goods maker. The Hermes family, who filed several complaints against its larger competitor, has regrouped into a tighter shareholder pact controlling more than 50 per cent. Arnault has always said that Hermes is just a portfolio investment. It has been good for him - he is sitting on a paper profit of about euro 2 billion after the shares have risen 2.5 times in the last three years. But no one believes he isn't also seeking control. For that, he will have to wait until the family mellows - or splits. He could be waiting a long time. If the French billionaire, as the AMF alleges, started amassing his stake in 2001, then one can at least believe him when he says that he is a long-term investor.

Arnault's pounce raised eyebrows in 2010 because he used cash-settled options to build up his stake. LVMH then decided that it wanted the settlement to be in shares - which had to be bought on the market by its banks. The main loophole is that such derivatives weren't subject to disclosure requirements. As for the larger dispute of whether he is "hostile" or not, Arnault spends too much time swatting away the suggestion that he always had a long-term plan to take over Hermes. So what if he did?