Gucci-LVMH Takeover Battlement

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Group Members:
KOK KEAN TEONG
MOH JIA WEI
NEO CHING HUP
ONG KAH HOEY
TEO SILK KEONG

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Gucci-LVMH Takeover Battlement

  1. 1. CAEA 3231CAEA 3231 Integrated Case StudyIntegrated Case Study Group Members: KOK KEAN TEONG CEA070059 MOH JIA WEI CEA070084 NEO CHING HUP CEA070109 ONG KAH HOEY CEA070157 TEO SILK KEONG CEA070197
  2. 2. The Battle of TakeoverThe Battle of Takeover
  3. 3. Introduction of TakeoverIntroduction of Takeover
  4. 4. Friendly TakeoverFriendly Takeover
  5. 5. Hostile TakeoverHostile Takeover
  6. 6. Hostile TakeoverHostile Takeover
  7. 7. Procedures Involved in TakeoverProcedures Involved in Takeover
  8. 8. Hostile Takeover DefenseHostile Takeover Defense StrategiesStrategies
  9. 9. IntroductionIntroduction Gucci Group NV (Target Company) ◦ Italian company ◦ Incorporated in Netherland ◦ Sells French Fashions ◦ CEO: Prior 2004> Mr. Domenico De Sole ◦ 2004 until now>Mr. Robert Polet ◦ Stocks traded on NYSE and Amsterdam Stock Exchange
  10. 10. IntroductionIntroduction LVMH Moet Hennessy Louis Vuitton SA (Attacker) ◦ World largest luxury group ◦ French company ◦ Incorporated in Paris ◦ Sells French Fashions ◦ CEO: Mr. Bernard Anault ◦ Stocks traded on Nasdaq Stock Market Trading and Paris Stock Exchange
  11. 11. IntroductionIntroduction PPR-Pinault Printemps Redoute SA ( White Knight) ◦ World 3rd largest luxury group ◦ French company ◦ Incorporated in Paris ◦ Europe largest non food retail group ◦ CEO: Mr. Francois Pinault ◦ Stocks traded on Paris Stock Exchange
  12. 12. History: 1923-1989History: 1923-1989 1923- 1953
  13. 13. History: 1989-1995History: 1989-1995 50% 50% 1993 1995- Go Public
  14. 14. The Start of the Battle (1999)The Start of the Battle (1999)
  15. 15. The Start of the Battle (1999)The Start of the Battle (1999)
  16. 16. Ways to amass 34.4% of stakeWays to amass 34.4% of stake
  17. 17. The Start of the Battle (1999)The Start of the Battle (1999)
  18. 18. The Difference RegulationsThe Difference Regulations between Countriesbetween Countries
  19. 19. The Start of the Battle (1999)The Start of the Battle (1999)
  20. 20. Analysts’ ViewAnalysts’ View Reasons to take control over Gucci: ◦ LVMH damaged by turmoil in Asia and losses at its retail division ◦ Gucci is seen as undervalued, strongly managed, and having potential growth ◦ Gucci is geographically attractive ◦ Gucci has higher % of sales in US
  21. 21. The Real ReasonThe Real Reason
  22. 22. The Start of the Battle (1999)The Start of the Battle (1999)
  23. 23. The Start of the Battle (1999)The Start of the Battle (1999)
  24. 24. The Standstill Agreement betweenThe Standstill Agreement between PPR and GucciPPR and Gucci Strategic Investment Agreement ◦ PPR is allowed to increase stake to 42% and disallowed to increase any stake >42% in 5 years time ◦ PPR is allowed to increase max 10.1% stake if LVMH increase its stake in Gucci ◦ If LVMH launch full bid, PPR has option to sell all shares or offer higher bid to buy Gucci ◦ Gucci can acquire Yves Saint Laurent and other perfume Lines from PPR for $ 1 billion
  25. 25. The Process of Full Takeover BidThe Process of Full Takeover Bid
  26. 26. Court’s DecisionCourt’s Decision Gucci is guilty for mismanagement in terms of timing (article 2:8 of the civil code ) ESOP is invalid PPR’s 42% stake in Gucci is valid
  27. 27. Dutch Supreme Court’s DecisionDutch Supreme Court’s Decision held that the enterprise chamber was wrong in finalized any decision without an official inquiry The chamber then appointed 2 Dutch Lawyers and a former CEO of a large financial institution as official investigators
  28. 28. Peace NegotiationsPeace Negotiations LVMH, Gucci and PPR met at offices at Darrois Villey in Paris Came out with a settlement agreement and revised Strategic Investment Agreement
  29. 29. The Settlement AgreementThe Settlement Agreement PPR spent $812 million to buy 8.6 million shares from LVMH at a price of $94 per share (a $2 premium) and making PPR own 53.2% of Gucci A special dividend of $7 per share will be given to all shareholders except PPR PPR will buy all shares which does not belongs to PPR at $101.50 in 2004 PPR has the right to a majority of the board and designate the chairman after the completion of the offers in 2004 LVMH will forgo all of the legal claims against Gucci and PPR
  30. 30. The End of the Battle (2001)The End of the Battle (2001) LVMH – capital gain of 760 million euro Gucci- no longer under attack and able to do a lot of acquisitions PPR- able to get full control over Gucci in 2004
  31. 31. Changes in Structures Prior andChanges in Structures Prior and After the Takeover ProcessAfter the Takeover Process
  32. 32. Share PriceShare Price Source: Moneycentral.msn.com
  33. 33. Share PriceShare Price Share Price: Annual 2002-1998 Year   NYSE High   US$ Low   Euronext Amsterdam High   € Low 2002   99.4  82.5  110.9  83.9 2001   94.7  66.7  109.1  66.5 2000   116.2  72.9  122.0  81.4 1999   121.5  61.0  121.9  56.6 1998   75.3  31.5  65.0  26.1 Source: SEC report on 31/7/2003
  34. 34. Capital StructureCapital Structure IAS Financial Data of Gucci 1998-2000 (in Euro Million) Source: SEC report on 31/7/2003
  35. 35. Top ManagementTop Management Name   Position   Age   Year of  Initial  Election Domenico De  Sole   Chairman   59   1995 Tom Ford   Vice Chairman   41   2002 Aart Cooiman   Member   61   1995 Members of the Management Board (July 1, 2003):
  36. 36. Top ManagementTop Management Name   Position   Age   Year of Initial  Election Adrian D.P. Bellamy   Chairman   61  1995 Patricia Barbizet  Member   48  1999 Aureliano Benedetti   Member   67  1995 Reto F. Domeniconi  Member   67  1997 Patrice Marteau  Member   55  1999 François Henri Pinault  Member   40  2001 Karel Vuursteen   Member   61  1996 Serge Weinberg   Member   52  1999 Members of the Supervisory Board (July 1, 2003):
  37. 37. Business StructureBusiness Structure
  38. 38. Business StructureBusiness Structure
  39. 39. Corporate Financial PerformanceCorporate Financial Performance Revenue (Euro Million) Source: SEC report on 31/7/2003
  40. 40. Corporate Financial PerformanceCorporate Financial Performance Operating Profit (Euro Million) Source: SEC report on 31/7/2003
  41. 41. OwnershipOwnership Name   No. of  Shares Beneficially  Owned   Percent of  Outstanding Share  Capital   Pinault-Printemps-Redoute S.A. 64,233,996 64.6 % Crédit Lyonnais S.A. 11,484,609 11.5 % Share Ownership (as a % of shares outstanding on July 1, 2003) Source: SEC report on 31/7/2003
  42. 42. Analysis of Similar MajorAnalysis of Similar Major Takeover That Wasn’tTakeover That Wasn’t SuccessfulSuccessful
  43. 43. Impact of Takeover Failure toImpact of Takeover Failure to IndustryIndustry
  44. 44. Impact of Takeover Failure toImpact of Takeover Failure to EconomyEconomy
  45. 45. ConclusionConclusion

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