Sep 4, 2013
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LVMH will not appeal AMF fine over Hermès

Sep 4, 2013

PARIS, France - Luxury goods group LVMH said on Tuesday it would not appeal a fine imposed by France's markets watchdog AMF in relation to LVMH's stake-building in rival Hermès.

In July, the AMF fined LVMH 8 million euros (6.76 million pounds) for failing to properly disclose its stake-building in rival Hermès before 2010.

LVMH said in a statement that while it would have been "entirely justified" in appealing the AMF fine, it had decided to bring a definitive end to the AMF proceedings to avoid interference with "the sound management" of its stake in Hermès, which stands at 23.1 percent.

While not as high as the maximum 10 million-euro fine that could have been imposed, the AMF fine had come as a victory for Hermès - the 175-year-old maker of Birkin and Kelly handbags - in its fight to punish LVMH for secretly building up a stake.

The AMF's enforcement committee had notably condemned the "unusual" way LVMH had amassed its shares, buying equity swaps with a number of banks so as to avoid disclosure requirements and using foreign subsidiaries that were not listed as consolidated units until its 2010 annual report.

LVMH stressed that throughout its proceedings, the AMF "expressly confirmed that in acquiring its equity stake in Hermès, LVMH never breached regulations regarding ownership thresholds or engaged in insider trading or market manipulation"

With the AMF chapter closed, the rest of the battle has yet to be played out, as Hermès in June launched a fresh round of legal proceedings against its arch-rival to obtain the outright cancellation of the equity swaps used by LVMH.

LVMH said on Tuesday it will take all necessary action to end "the baseless legal proceedings being pursued by Hermès management and to recover compensation for the serious harm their actions have caused."

Hermès declined to comment.

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