Fashion Faux Pas: Gucci & LVMH
LVMH Moet Hennessey Louis Vuitton (France) acquired a large interest in the Gucci Group (Italy and Netherlands) in January 1990. Gucci accused LVMH of undertaking a "creeping acquisition" and refused to cooperate in LVMH's efforts to gain representation in Gucci's management. The case details the actions of the purported takeover attempt, and the defense mechanisms employed by Gucci. The defenses employed included the use of a poison pill and a white knight. Ultimately, Gucci found a white knight, Pinault-Printemps-Redoute (PPR) of France to save it from LVMH's unwanted advances. The primary question, which the case addresses, is whether the actions taken by Gucci's management in defending its independence were actually in the best interests of shareholders.
The case was written to demonstrate to students the practical dimensions of acquiring interest and influence in publicly traded companies. The takeover laws and rules regarding publicly traded companies differ dramatically from country to country, as illustrated in the case. Class discussion typically revolves around whether a change in ownership should result in a premium being offered to all shareholders, including minority shareholders, and which actions taken by companies to either preserve their independence, capture a premium, or preserve the power of management are appropriate. An additional area of topical discussion is often that the concept of "fair to shareholders" may be culturally specific to the expectations of what shareholders in any specific market have learned to expect.