The Gucci - LVMH Battle

The news of PPR acquiring a 40% stake in Gucci came as a surprise for Bernard Arnault (Arnault), Chairman of the Moet Hennessy Louis Vuitton (LVMH) group, who had been trying to acquire Gucci through open market stock acquisitions. Gucci announced that it would issue more shares if LVMH tried to further increase its stake in the group. Gucci President Domenico De Sole (De Sole) said that he had the support of Gucci staff, suppliers and independent shareholders to keep LVMH off the board. Earlier, Gucci had approved an employee stock option scheme (ESOP) to counter LVMH's acquisition tactics. Not only did LVMH remain powerless in Gucci despite spending $ 1.4 billion, but its share prices also began sliding on the Paris stock market.

As a result of these deals, overnight the Gucci/PPR combination became a major competitor for LVMH. LVMH now made a full takeover bid for Gucci at $ 81 a share, $ 6 more than what PPR had paid. At the same time, it dragged Gucci to the court to annul the deal with PPR and replace its board with an independent overseer. The Gucci-LVMH battle took the global fashion industry by surprise. More so, because in 1994, it was Arnault himself, who had turned down an offer to buy Gucci for $ 400 million. However, in just five years the same man had spent $ 1.4 billion in building up a 34% stake in Gucci. A media report said, "How a $ 400 million reject became a highly desirable $ 8 billion company is one of the greatest comeback stories in the fashion business."