(Corrects to show that magistrate was appointed as a result of
Hermes complaint and not as a result of preliminary
investigation; also corrects date of appointment of magistrate
to Feb. 20 from Feb. 22)
By Chine Labbé and Astrid Wendlandt
PARIS, March 14 An investigating magistrate has
been named to probe the conditions surrounding the stake that
luxury group LVMH has built in smaller rival Hermes
, a judicial source said on Thursday.
The appointment gives fresh impetus to Hermes's battle
against LVMH, the world's biggest luxury group and owner of
fashion brand Louis Vuitton and Hennessy cognac.
The appointment of the magistrate is not related to
preliminary checks conducted by the French financial police.
LVMH, which today owns 22.6 percent of Hermes, surprised the
market in October 2010 when it announced that it had a 14
percent stake in Hermes, gained partly via equity derivatives
that allowed it legally not to declare its holding.
In July, Hermes, which sees LVMH's entry into its
shareholder capital as hostile, asked prosecutors to open a
probe into alleged insider trading and share manipulation by
LVMH related to its stake-building in 2012.
Hermes filed a new complaint in October, asking a magistrate
to launch a formal investigation. The appointment of a
magistrate is usually the next step in this process.
Hermes argues that LVMH did not tell the market for many
months that it was a buyer of Hermes shares, information that
would have boosted Hermes' share price.
LVMH, which denies any wrongdoing, said Hermes' complaint
was groundless and threatened in September to retaliate by
launching proceedings against Hermes for making disparaging and
But LVMH waited to lodge its own complaint against Hermes
until the appointment of an investigating magistrate, on Feb.
20, became public. The group started proceedings against Hermes
at the beginning of this week.
"LVMH plans with this initiative to put an end to the unfair
and disparaging campaigns carried out against it since it
arrived in the shareholder capital of Hermes," the group said in
a statement sent to Reuters on Thursday.
The Paris prosecutor's office had still not received LVMH's
complaint on Thursday.
A source close to Hermes, who did not wish to be named, said
LVMH's complaint was a "decoy launched just when a magistrate
has been named".
"We initiated proceedings against LVMH only after having
been assured by our lawyers that there was no risk of making
libellous statements," the source added.
LVMH's stakebuilding has led to a feud between it and
Hermes, which has created a majority family shareholding to
protect it from a takeover by LVMH.
LVMH, however, has repeatedly said it does not have any plan
to bid for Hermes.
The legal loophole allowing a party to use derivatives to
build up a stake in a listed company has since been closed
following amendments to French law last year.
The French markets watchdog, AMF, said in October it did not
believe LVMH had engaged in insider dealing or share price
manipulation when it bought its first holdings in Hermes.
However, the AMF transferred the case to its sanctions
committee to decide whether LVMH had done anything wrong. The
panel is due to decide by the summer, a spokeswoman for the AMF
said on Thursday.
(Editing by Steve Orlofsky)