Bertrand Puech

>> Is a fissure in Hermes's family unity against LVMH and Bernard Arnault already emerging? Some thought it would take years, but Nicolas Puech, brother of Bertrand Puech (who is executive chairman of Emile Hermes and represents the family shareholders), told French newspaper Le Journal du Dimanche that he doesn't agree with the family's current defense strategy, which involves locking up all of their shares in a holding group to protect from takeover bids by Arnault.

“I told my family that locking up our shares in a holding would have the major drawback of depriving the family shareholders of their individual power to control management,” Nicolas Puech said. He did add, however: “But in a family, you can’t agree on everything. I am very attached to my family and above all I want it to remain united.” His brother Bertrand, who Nicolas says he remains on good terms with, has repeatedly, and publicly, asked Arnault to withdraw from the company.

Hermes CEO Patrick Thomas said at a news conference recently that one family member — who owns roughly 10 percent of the capital — had not brought his shares into the holding group for tax reasons, but added that he was still united with the family. The family member in question is likely Nicolas Puech — who also noted, “I have close relationships with many of my cousins" — a comment which, WWD points out, will "likely to be interpreted as a sign that Arnault could yet win over members of the Hermes clan."

>> Now that Bernard Arnault has publicly told Hermes that he won't be withdrawing, the family behind the brand is looking into further defensive measures.

Bertrand Puech, who represents the Hermes family, described Arnault and LVMH's presence as thus: "It's like a mosquito buzzing around, and it's annoying. But it's very difficult to get a mosquito out."

So the Hermes family is considering funneling its shares into an unlisted holding company, which would prevent individual family members from selling their shares to outsiders. This would be an extra defense: Puech heads Emile Hermes, the limited partnership that controls the fashion house and is open only to direct descendants of the founders, which is the current defense in place. The limited partnership's by-laws give the Hermes family decision-making power, even if only one family member remains a shareholder — which means it would be difficult for an outsider to control the company without the entire family's approval.

"The limited partnership is our best defense," Hermes Chief Executive Patrick Thomas said yesterday. "We put it in place for an event like today."

>> Yesterday in Le Figaro, Patrick Thomas, CEO of Hermes, and Bertrand Puech, representative of the Hermes family, in not so many words, asked Bernard Arnault to sell LVMH's newly acquired stake in the company.

Today, in that same paper, Arnault responded: “I don’t see how the head of a publicly traded company is qualified to ask an investor to sell his shares." He continued: "We’ve taken a stake in Hermes for the long term . . . Our presence in the capital of Hermes presents no risk to society nor to family control. Quite the contrary . . . this operation is a completely amicable one, what’s hostile is the demand that we sell our shares!”

Arnault added that LVMH took stake in Hermes to provide "a certain amount of insurance that the brand will remain French." When it was pointed out that Hermes believes the move a clash of cultures, Arnault replied: "Our cultures are, I think, pretty close. LVMH is the world's leading manufacturer of high quality products. Vuitton trunks, dresses, haute couture from Dior, Dom Perignon, Chateau d'Yquem, among other examples . . . We have in the LVMH group a culture of handicrafts. And LVMH, like Hermes, is a family group. I am convinced that we, as a shareholder, could bring a number of advantages to Hermes."

As for Hermes's stance that its performance is better than LVMH, and it needs no help, Arnault said: "If you want to compare numbers, compare those of Hermes with Louis Vuitton. In this case of either growth or the result, the performance of Louis Vuitton is much better. That said, the figures of Hermes are excellent, too."

>> Late last month, LVMH stealthily purchased 17.1 percent of Hermes shares, and despite denying any full-on takeover bids, LVMH announced intentions to buy more shares depending on market conditions. Hermes executives are not taking the news lying down.

In a newspaper interview with Le Figaro today, Patrick Thomas, CEO of Hermes International, and Bertrand Puech, who is a fifth-generation heir of Hermes founder, Emile Hermes, and represents the family shareholders, called for LVMH chairman and CEO Bernard Arnault to get rid of his newly-acquired stake. They added that they did not see the shares purchase as "friendly," despite Arnault's assurances that he doesn't plan a hostile takeover. "The family is saying clearly and unanimously: ‘If you want to be friendly, Monsieur Arnault, then you must withdraw’,” Puech added.

Arnault phoned to notify Puech of the stake just hours before issuing a statement, causing him “surprise and displeasure,” he said. Thomas and Puech both met with Arnault last week after the announcement, where they told him face-to-face that they don't consider his overture friendly. “There is nothing friendly about this move. It was neither desired nor solicited,” said Thomas, adding: “It is very probable that he will increase his stake, I don’t know his intentions. This culture [of craftsmanship and strong traditions] is hardly compatible with one of a big group. It is not a financial battle, it's a cultural battle."

Hermes family members still control 73 percent of the firm not currently owned by Arnault and are awaiting the French market regulator's decision on whether LVMH's stake purchase happened legally.