Gucci war comes to an end

September 10, 2001 Posted: 1055 GMT

LONDON (CNN) -- French luxury empire LVMH has ended a two-and-a-half-year feud with retailer Pinault Printemps Redoute over the control of fashion house Gucci.

LVMH Chairman Bernard Arnault and PPR's owner Francois Pinault, both self-made billionaires, first locked horns in 1999 after Gucci called in Pinault to protect it from a takeover from LVMH.

VIDEO CNNfn's Rym Brahimi reports on the deal for control of the fashion house Gucci (September 10) Play video (QuickTime, Real or Windows Media)

PPR will immediately buy 8 million Gucci shares from LVMH for $94 a share. Gucci will distribute a special dividend of $7 per share to all Gucci shareholders, as part of the agreement.

The French retailer PPR will buy all Gucci shares at $101.50 per share in March 2004.

Arnault and Pinaults' acrimonious battle to control the Florentine fashion house has enthralled the business and fashion world. The drama has become personal, being dragged out in the courts and media.

Mediation attempts by Jean-Marie Messier, chief executive of Europe's biggest media company Vivendi Universal, and appeals for calm from French President Jacques Chirac had come to nothing.

Deal ends two-and-a-half year feud

The dispute began in March 1999, when Gucci Chairman Domenico de Sole called upon Pinault to protect his company against a takeover from Arnault's LVMH, the world's biggest luxury goods group.

VIDEO Mintel Retail Intelligence's Bryan Roberts talks to Becky Anderson about the long running dispute over fashion house Gucci. Play video (QuickTime, Real or Windows Media)

Pinault snatched a 42 percent of Gucci in a dawn raid that shrank Arnault's 34 percent stake to 20 and denied him a seat on the board.

Francois Pinault, France' richest man, took his company's holding in Gucci to 53.2 percent.

"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," Antoine Colonna, luxury goods analyst at Merrill Lynch, told Reuters.

LVMH will receive a total of about 2.1 billion in cash by selling its stake and book a profit of 760 million on the investment, the company said. For its part, PPR will sell 700 million in new shares and 700 million of convertible bonds to pay for the acquisition.

PPR shares fell 4.6 percent to 134 in midday trade in Paris, as the bench mark CAC 40 dropped to a fresh three year low. LVMH lost 2.9 percent to 47.7, while Gucci rose 6.5 percent to 98.

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