The Fued over Gucci Ends Peacefully

The world’s biggest luxury goods group LVMH , owned by billionaire Bernard Arnault, and Pinault Printemps Redoute (PPR) controlled by France’s richest man Francois Pinault, said they and Gucci had sunk their differences in an agreement satisfactory to all sides.

“We have got a deal,” a Gucci spokesman told Reuters. “It secures our independence and we have got a great deal for independent shareholders.”

The three-stage deal includes a $7 special dividend to be paid by Gucci this year, and a public offer by PPR for all Gucci shares at $101.50 per share at the start of 2004.

“Like all settlements it’s a compromise, but it’s a good deal all round-it is the best solution for Gucci’s minorities and for LVMH it is positive as well,” said Antoine Colonna, luxury goods analyst at Merrill Lynch.

“For LVMH it is an exit from an investment with a nice capital gain, after the goal of achieving a controlling interest could not be realized. It enables them to reduce their debt level,” added Scilla Huang, manager of a luxury goods fund at Clariden Bank in Switzerland and a holder of Gucci shares.

The dispute arose in March 1999 when Pinault, invited into Gucci as a white knight shareholder, snatched a 42% stake that diluted Arnault’s 34% holding to 20.6% and denied him a seat on the board. Under the terms of the deal, PPR will acquire eight million Gucci shares, or about eight percent of Gucci, from LVMH at $94 a share, lifting Pinault’s 42% stake to 53.2%.

Gucci will pay all shareholders except PPR an extraordinary dividend of $7 before December 15. Then in three years’ time PPR will make an offer for all Gucci’s outstanding shares at a guaranteed price of $101.5, payable in April 2004.

Gucci head Domenico De Sole told a conference call the board would initially add one member to 10, divided equally between PPR and independent members. Its head will remain independent. In 2004, PPR will gain the right to nominate a majority of board members and the chairman, subject to majority approval.

But in situations of possible conflict of interest between PPR and Gucci Group, it is sufficient for a board member to raise the matter for it to be devolved to the independent board members, Mr. De Sole said.

“Now the company can give its entire attention to driving forward its multi-brand strategy,” Mr. De Sole said, adding he and Gucci’s star designer Tom Ford had not been granted extra stock options besides the one million and four million they owned respectively already.