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LVMH Offers To Buy All of Gucci

March 19, 1999

PARIS (AP) _ French luxury goods conglomerate LVMH Moet Hennessy Louis Vuitton offered Friday to buy all of Gucci Group in a sudden change of course forced by a rival offer for the Italian fashion house.

LVMH’s bid came after Gucci agreed earlier in the day to sell a 40 percent stake to French retailer Pinault-Printemps-Redoute for $2.9 billion.

LVMH said if Gucci scraps that deal, it will offer more than the $75 per share offered by Pinault-Printemps. But LVMH declined to reveal the price.

Financial analysts, howver, estimated the offer is about $80 a share, which would value Gucci at more than $4.6 billion.

A Gucci spokeswoman, who declined to be named, called LVMH’s takeover bid ``a victory for Gucci,″ as LVMH is offering the price that Gucci has been asking since LVMH began buying Gucci shares on the stock market earlier this year. She also declined to name the price LVMH has offered.

Gucci said its board would review LVMH’s bid at a meeting Sunday and decide whether to recommend it to shareholders over the offer from Pinault-Printemps, whose chairman is Francois Pinault, France’s wealthiest financier.

``Gucci is the world’s prime luxury brand and LVMH is obviously willing to pay for it,″ said Jan Linderman, a director at the London consulting firm Interbrand, Newell and Sorrell. ``It is not a cheap buy, but I think they can pull it off.″

Pinault-Printemps’ move for Gucci amounted to a slap in the face for LVMH’s chairman Bernard Arnault, who has spent the past month wooing Gucci himself.

Gucci had argued until now that LVMH was attempting a ``creeping takeover,″ and demanded that LVMH either make a full bid or provide legal guarantees limiting its influence.

LVMH had sought control of Gucci, but said it wasn’t interested in making a full takeover.

LVMH and Gucci have been locked in a fight for control for the past month, following LVMH’s $1.4 billion purchase of a 34.4 percent stake in the Italian company.

Analysts say that Gucci, which has staged a spectacular turnaround over the past two years, has the potential for growth in leather goods, watches and fashion items that could give LVMH a needed boost.

LVMH on Thursday posted a 29 percent drop in 1998 net profit, mainly because of weakness in Asia.

LVMH isn’t limiting its horizons to Gucci, however. The United States is an increasingly important market for the luxury goods giant, which wants to counterbalance the effects of Asia’s downturn.

Reflecting the new direction, the French group on Thursday announced it has purchased a controlling stake in New York cosmetics and spa company Bliss World, which makes and markets skin-care and home-spa products under the Remede and Bliss brands, and also bought a 24 percent stake in U.S. sportswear brand Gant through its LV Capital investment fund.

LVMH owns a wide array of luxury brands including Louis Vuitton, Christian Dior, Givenchy and champagne maker Veuve Cliquot.

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