Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Hermès Family Held Off LVMH
Transcript
- Lucas: So in October 2010, Bernard Arnault did something very French and very aggressive: he announced that LVMH had secretly accumulated a 17.1 percent stake in Hermès. No warning, no friendly dinner, no 'we'd like to explore a partnership.' Just a press release. Luna: And the Hermès family — who at that point controlled about 73 percent of the shares — had no idea it was coming? Lucas: Exactly. They found out the same way everyone else did. And here's the kicker — LVMH didn't buy the shares on the open market in a normal way. They used equity swaps with three banks — BNP Paribas, Natixis, and Crédit Agricole — to build the stake quietly. Legally, they weren't the registered owner of the shares until the swaps settled. So no disclosure threshold was triggered. Luna: That is... technically brilliant and morally questionable. It's like sneaking into a house through a window you don't technically own yet. Lucas: Right. And the Hermès family's reaction was essentially, 'We are not going to let this stand.' But they didn't have a poison pill in place — those are less common in Europe — and they couldn't just buy back shares because they'd need liquidity. So they did something that became a case study in family defense. Luna: Before you get into the mechanics — I want to say, if this story makes you think about your own business or your own family's assets, and you found it useful, honestly, if it was worth a coffee to you, there's a link: buy me a coffee dot com slash fexingo. Tiny gesture, huge help for keeping the show ad-free. Lucas: Yeah, completely. We don't run ads, so listener support is what makes this possible. And now, back to the Hermès playbook. Lucas: So the family's key move was to consolidate. In December 2010, about 50 family members pooled their shares into a new holding entity called H51 — named because they collectively held just over 50 percent of Hermès shares. By doing that, they locked up a controlling bloc that LVMH couldn't touch. Luna: And they didn't just stop at the holding company. They also signed a pact that restricted share sales for 20 years — effectively freezing the ownership structure. Lucas: Yes. The pact was called a 'société en commandite par actions' — a limited partnership with shares. Under that structure, the family retained control even if outside investors held economic rights. It's the same mechanism that allows companies like Michelin and L'Oréal to keep founding-family influence. Luna: But LVMH didn't just roll over, right? They sued, they complained to regulators, they tried to get the AMF — the French stock market authority — to declare that the family's move was a covert takeover defense that violated market rules. Lucas: Correct. The AMF investigated and in 2013 fined LVMH 8 million euros for failing to disclose the equity swap positions properly. But the family's structure was upheld. Then LVMH took it to court, arguing that the holding company was a disguised takeover defense that should have been put to a shareholder vote. The court disagreed. Luna: So the family won on every front. But there's a cost, isn't there? By locking up control so tightly, they also locked out liquidity. The Hermès stock trades at a premium because there's a finite float, and the family can't easily sell without destabilizing the price. Lucas: That's the trade-off. Hermès today has a market cap of roughly 200 billion euros. The family's stake is worth over 100 billion on paper — but a lot of that is tied up in a structure that restricts sale. They've created a governance model that prioritizes independence at the expense of flexibility. In 2014, LVMH finally unwound its stake, distributing shares to its own shareholders, and the two companies have kept an uneasy peace since. Luna: And the family has kept control. But the question is: for how many more generations? The pact runs until 2030. After that, family members could theoretically sell. The pressure to monetize will only grow as the younger generation comes into wealth they didn't create. Lucas: That's the real tension in any family business that goes through a defense like this. You win the battle, but the fortress you build can become a trap. Hermès is a brilliant case study in how to repel a hostile suitor — but also in what you give up to stay independent.