France’s financial market regulator said Monday it had fined luxury conglomerate LVMH a record 8 million euros ($10.4 million) for failing to inform markets it was raising its stake in elite handbag and scarf maker Hermes.
“Taking into consideration the ‘seriousness of the successive breaches of public disclosure requirements, which consisted in concealing each stage of LVMH’s stakebuilding in Hermes’, the Committee imposed an 8 million euro fine on LVMH,” said a statement from the AMF regulator citing the decision.
LVMH immediately said it planned to appeal, calling the decision and amount of the fine imposed “totally unjustified”.
The two companies have been locked in a bitter feud ever since LVMH, which owns Louis Vuitton and dozens of other luxury brands, revealed in late 2010 that it had secretly built up a 17-percent stake in the family-dominated Hermes.
LVMH, led by tycoon Bernard Arnault, later built this holding up to 22.6 percent prompting Hermes to cry foul and accuse Arnault of surreptitiously trying to add Hermes to his large stable of brands.
The AMF took issue with the way LVMH used swap agreements with three banks for amounts just below mandatory disclosure rules.
While it acknowledged that in isolation, none of the deals infringed disclosure rules, the AMF found there was no commercial justification for how they were structured and overall constituted a breach.
It said LVMH should have informed markets in 2008 and 2009 about the deals in its consolidated accounts as it had a responsibility to report preparations for transactions that would have an impact on share prices.
Moreover, LVMH should have disclosed the deals when it agreed in June 2010 to settle the swaps and acquire the shares in Hermes.
The decision by the AMF’s enforcement committee said the “circumvention of the rules intended to ensure transparency, which is so vital to orderly markets, must be punished to the same extent as the disruption it causes.”
The fine is a record for AMF, but less than the 10 million euros sought by its investigators.