Breakingviews - French squeeze-out plans may tempt Arnault on Dior

A huge advertisement for Dior perfume installed on the facade of a building is seen at the Place Vendome in Paris March 18, 2014. French luxury group LVMH is trying to push out smaller rivals from plush Place Vendome in Paris after buying one of its highest-profile buildings, illustrating the intensifying battle for Europe's prime retail locations. Cash-rich groups such as LVMH, Richemont and Hermes have been stepping up property investment in key fashion capitals, buying entire buildings to lock in premium sites for which prices and rents are rising fast. Picture taken March 18, 2014. REUTERS/Charles Platiau (FRANCE - Tags: BUSINESS)

MILAN (Reuters Breakingviews) - France’s new squeeze-out plans may tempt luxury magnate Bernard Arnault to make a final swoop on taking his Christian Dior holding private. President Emmanuel Macron’s wide-ranging bill to make la Republique more attractive for business, known as “loi Pacte”, envisages cutting to 90 percent the bar for companies wanting to buy out listed minorities. The rule changes, combined with falling luxury stocks prices, may revive the magnate’s interest in taking Dior behind closed doors.

France’s richest man last year put on the table 12 billion euros to take full control of Dior, which owned back then 41 percent of the 126 billion euro luxury conglomerate LVMH. The bid – worth 260 euros a share – lifted the Arnault family’s stake in Dior to 94.2 percent, short of the current 95 percent threshold for squeeze outs. The tycoon has since raised his interest to 96.5 percent, Refinitiv data show, giving him a free hand to deal with Dior even before new French rules come into force.

The tycoon is under no real pressure to delist Dior. He already controls it, and LVMH, and has wrapped the iconic Christian Dior Couture brand into the handbags-to-champagne giant. But there could be advantages. Taking Dior’s stump private would, for instance, reduce financial disclosure needs. This means less paperwork and cost savings. LVMH shareholders may also welcome a further shortening of the chain of command. Dior is one of several holdings sitting between LVMH and its ultimate owner. With 100 percent control, Arnault would be able to get rid of one layer.

Dior’s price tag rose since his last bid. But a recent selloff in the luxury segment amid sluggish Chinese spending offers a window of opportunity. Dior shares, which correlate to LVMH, trade roughly 12 percent below a peak hit this summer. At 335 euros a share, the listed rump is worth 1.97 billion euros and trades just above its three-month moving average, Refinitiv data show. This means Arnault could probably take the minorities home for no more than 2 billion euros.

That’s no small bite: It’s three quarters of what the conglomerate shelled out for swanky hotel chain Belmond before Christmas. But if luxury returns to fashion, and LVMH starts to rise again, the hesitation on Dior could prove costly.


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