Arnault

"the Arnault and Savinel families rub shoulders with Jean-Pierre and Régis Willot but do not socialize with them. The Willot brothers are neighbors, as are the Mulliez family (who would later found Auchan), but they are only greeted furtively. Instead, they seek recognition, even an invitation from the Tiberghien, Prouvost, Masurel, Dewavrin, and other prominent families, often in vain."

"The 40 million francs raised by the sale of Ferret Savinel's main activity to the Rothschild group makes it possible to redistribute the family capital, which has become liquid, in favor of son Arnault, who is now a 50/ 50 partner with his father in the new activities of promoting the construction of individual houses."

"The funds for the capital increase still need to be found. On one side, Alain Clarou, on the other, Antoine Bernheim, take up their pilgrim's staff. Arnault had assured Bernheim that he could put 90 million on the table, but he actually only has 40 million, from the sale of Férinel's construction activities. Crédit Lyonnais, in which Michel Lefebvre has kept excellent contacts, is ready to advance 50 million. In any case, 90 million is by far insufficient. Lazard Bank will fully engage to bring together a solid consortium."

"But Arnault has a weakness: he is not a specialist in textiles. How can the choice of a real estate developer to lead a textile group be justified in the eyes of the public? The opposition will jump on this to denounce the inconsistency of government action. Matignon therefore suggests to Arnault to ensure the support of a professional who can bring order to the sick branch of the group and thus make his solution credible. "Go see Charlier," he is advised."

"An inter-ministerial committee meets at the Hôtel Matignon. The Prime Minister and the relevant ministers have delegated members of their cabinet. Among them are Hélène Ploix, Robert Léon for Finance, Patrice Léopold for Industry, and Alain Boublil for the Élysée. The discussion will not be long. The instruction has been given to choose the solution that avoids any new legal challenge. Therefore, the Arnault plan easily wins because it allows to immediately put an end to a case that has been dragging on for three and a half years, while the appointment of Bidermann would be equivalent to starting over: the agreements between the Willot and the boss of Férinel would have to be cancelled. At 10 pm, Hélène Ploix calls the interested parties and promises them an answer by 10 am the next day."

"The difficulty lies elsewhere, in the required majority rules. For a concordat to be adopted, it must be approved by half of the chirographers holding two-thirds of the claims in value. With the help of Lazard, Arnault contacted them one by one to offer to buy back their claims. The task is enormous: there"

"Maurice Bidermann. Defeated in 1984 as well as 1978, Bidermann does not want to give up. In the first months of 1985, he attempted one last maneuver. His tactic was as follows: to buy enough claims to be able to oppose Arnault's proposals in the conciliation assembly. According to his calculations, there would be no other solution but judicial liquidation. And he could then be a candidate for the bulk purchase of the assets of the group he covets, mainly Boussac and Dior textiles. In his new offensive, Bidermann has enlisted his partners from the previous year, Bouygues and the Worms bank."

"Looking at it, the assets of the group appear considerable. Dior alone, according to an evaluation based on indications from the company, which will prove to be largely underestimated, would be worth around 1 billion francs. This is followed by Conforama (between 600 and 800 million), the Bon Marché-Belle Jardinière group (600 to 700 million), buildings (600 million) and Peaudouce (300 million). Not to mention the stocks valued at 1 billion. In total, nearly 5 billion francs, or nearly three times the amount of liabilities and twice as much as Arnault had estimated in his 1984 plan!"

"However, successive administrations by Marcel Boussac, the Willot family, and René Mayer have left a mountain of debt, amounting to no less than 3.6 billion francs. Before figuring out how to repay this debt (meaning which assets he will have to sell), Arnault's primary concern is to reduce this amount by obtaining waivers and payment deferrals from creditors. He will therefore ask creditors to make sacrifices, using a powerful argument: he will only invest 400 million in the company if his conciliation proposals are approved. In the event of rejection, there will be no other option but judicial liquidation. The implication is that in this case, creditors will have nothing left to do but weep."

"Arnault sells most of Boussac Saint-Frères' textile activities to the Prouvost group. In return, Boussac receives 27% of the capital of Lainière holding, valued at 300 million. To obscure the matter, Arnault will invest 250 million (21% of the capital) in Vitos Établissements Vitoux (VEV), the holding company that controls Prouvost. This allows him to say: "We are not selling. I am investing 250 million and becoming the second-largest shareholder in what has become one of the largest European textile companies." But it is indeed a disengagement. And these 250 million are, on a larger scale, similar to the money given to the International Cotton Company to buy the factories Boussac wanted to get rid of: in both cases, it is the seller who pays the buyer! It's all a matter of packaging."

"He enters negotiations with the government Neither Madelin nor Séguin, and even less Balladur, are willing to block the agreement with Môlnlycke. They simply want guarantees on how Arnault will use his loot. Everyone has their own ideas on this. Séguin, elected in the Vosges, wants him to devote part of the 2 billion to modernizing the Boussac factories in his region. Balladur, for his part, wants him to place under sequestration the 338 million francs that the European Union is claiming from France. The Ministry of Finance also demands a guarantee on the 270 million francs of participatory loans that he had received in early 1985. By the way, Arnault is reminded of his promise to give the State a "return to better fortune" clause of up to 300 million francs starting in 1991. Madelin seeks assurances about the future of Boussac's textile industry, which still employs 5,300 people. It is on the eve of the presidential election and it is better to guard against a possible social drama."

"To do so, he increases the capital by 530 million francs, which is fully subscribed by the new partners. Half a billion in fresh money thus enters his coffers. Arnault can therefore repay Crédit Lyonnais while remaining in control by keeping the majority of Arnault and Associates SA, which controls Financière Agache."

"Arnault's stake in SFFAW even rises to 36%, considering additional purchases he made on the stock market. If we add the self-control-that is, the company's shares held by its own subsidiaries-he controls 51% of the shares and therefore holds an absolute power. He will not let go of it anymore."

"Two years after its creation, Christian Lacroix recorded losses of 69 million francs for a turnover of barely 37 million francs! For Arnault, the objective is partly achieved: he has demonstrated that he is capable of founding a company... Drawing a parallel with Saint Laurent, who according to Pierre Bergé, lost money for fourteen years starting in 1962 to trigger a profit avalanche starting in 1976, he declares to the International Herald Tribune: "Lacroix could become profitable very quickly, but it is not our strategy to seek short-term profits.""

"Arnault had chosen to diversify into distribution, a sector where he had a good base with furniture stores Conforama and Le Bon Marché."

"The head of LVMH assures that the company has finally achieved balance, but his remarks suggest a certain distance from his beloved creator: "Christian Lacroix did not sufficiently focus on the sale of his products. Since then, he has evolved. He now knows that real success is necessarily commercial and that success with fashion critics is good, but it is not enough," writes Arnault in his inimitable style: “LVMH does not have a vocation to be only a patron."."

"Lévêque knows that he will soon be ousted by the returning Socialists. Eager to make a big splash before his departure, he has decided to sponsor the secret alliance between Arnault and Racamier by opening up a first credit line of 2 billion francs to his protégé. He will be able to mobilize more than 5 billion to take 20% of LVMH. In reality, Crédit Lyonnais is offering Bernard Arnault an almost unlimited right of withdrawal that day. Arnault therefore continues his purchases on the stock market, which has the consequence of alarming Chevalier, who still doesn't know where the attack is coming from. On May 31, 100,000 LVMH shares are traded, 98,000 on June 1, 169,000 on June 2, compared to 25,000 under normal circumstances. The group is dancing on a volcano."

"For Arnault, on the other hand, the crash is a new stroke of luck. The opportunity is unexpected. Especially since, for months, he has been amassing ammunition. In September, one month before the crash, he put 13% of Conforama's shares on the stock market, which earned him nearly 300 million francs. A little later, it was Arnault and Associates, the head company, that was introduced to the second market. And in November, Financière Agache obtained a long-term credit of more than 800 million francs from a banking consortium led by Crédit Lyonnais. What does Arnault do with this war chest? With the support of Lazard bank, he buys LVMH shares, both personally and through Financière Agache."

"The Jacques Rober construction is admirably crafted. It gives Arnault, in his offensive, the financial support of the powerful Guinness battalions, while leaving him in control as the majority shareholder. How could the English brewer accept to be so bound and tied? He wanted at all costs to participate in LVMH's capital to consolidate his global distribution agreement in wines and spirits signed in 1987, which brought him a quarter of his profits, or more than 1 billion francs. Anthony Tennant, the head of Guinness, was convinced that he had no chance of succeeding alone in making a strong entry into LVMH due to the nationalist reactions of the French public and authorities, for whom the luxury group is part of the national heritage. With Chevalier's endorsement, Arnault would have argued that he had the support of the public authorities and that the most effective way to enter LVMH was to partner with him. This was confirmed by his own advisory bank, which was none other than... Lazard Brothers in London."

"Above all, a few days before the meeting, LVMH's stock has once again soared on the stock exchange. Who is buying? Racamier started it. Immediately, Arnault reacted by taking 10% of the capital. He brings out the big guns in the face of his rival's rifle. "It was an attack, it was entirely legitimate that we respond without delay," explained the CEO of Dior to justify this investment of 4.1 billion francs made in three days, without his partner Guinness being consulted, contrary to the terms of their agreement, which will provoke the anger of Anthony Tennant, forced to finance 40%. The Englishman is starting to think that young Arnault is exaggerating. But can he go so far as to endanger the global distribution agreement between the two groups? Not really. And the presence of Alain Chevalier helps to calm him down."

"However, the arrangement around Dior did not go as smoothly as expected. When he organized it, Arnault never doubted for a moment that the Dior shares issued would sell like hotcakes. Although they were expensive, he believed that the name Dior, along with the control of LVMH, would be magical enough to attract the wallets of French and international investors to whom they were offered. However, the plan seemed a bit far-fetched. Indeed, to everyone's surprise, investors hesitated. Crédit Lyonnais, the lead underwriter, encountered more difficulties than anticipated. Apart from the Japanese insurer Nippon Life, which invested 500 million francs, foreign financiers stayed away. The remaining shares were left in the hands of Crédit Lyonnais, which had to wait some time to recoup its funds. Eventually, Guinness, as part of the overall negotiation, took over the 16% stake in Dior's capital that the bank had no use for."

"He also allows Guinness to buy 16% of Christian Dior, but these were securities that Crédit Lyonnais had on its hands! In both cases, Arnault cleverly presents his progress as a concession. Tennant, thus, does not lose face even though he had to give in to the young Frenchman."

"Initially, Financière Agache transferred its 86.5% stake in Conforama to one of its unlisted subsidiaries, IPS, whose main asset until then was a 20% stake in La Belle Jardinière. Then, IPS was absorbed by Le Bon Marché, which thus became the parent company of Conforama and the majority shareholder (75%) of La Belle Jardinière. This created a group "combining both commercial dynamism and control of significant real estate assets," according to the statement by Financière Agache, a group that investors should not turn their noses up at. Arnault expects them to subscribe later to a 2.4 billion franc capital increase for Le Bon Marché, the proceeds of which will be reinvested in Christian Dior."

"Three days later, the Paris Commercial Court rules in his favor and grants the request: it appoints a judicial representative at Louis Vuitton, responsible for convening a general meeting to change the statutes. In his reasons, President Philippe Grandjean justifies himself with the massive argument already raised by Arnault and Godé: "It is not healthy to let the company be run by a team on probation and in disagreement with 98% of its shareholders." Racamier is not defeated. He immediately appeals."

"Thanks to Crédit Lyonnais' devotion, which lent the money and was now burdened with Christian Dior shares, Arnault found 3.3 billion francs from others. However, he needed to contribute 2 billion of his own to complete the capital increase while retaining 58% of Dior. Where would he find these funds? Robert Léon suggested selling one of his distribution companies, either Conforama or Le Bon Marché. However, such a possibility did not fit into Arnault's strategy, as he disliked selling assets. Furthermore, these two companies were listed on the stock exchange, providing the opportunity to raise capital."

"has a controlling shareholder, benefiting from a significant fraction of the capital and absolute decision-making power, ever increased their own stake at the expense of other shareholders through stock options? Because that's what it's about. In the normal framework of stock option allocation, shareholders agree to give up part of their wealth for the benefit of executives, betting that their greater motivation will enrich everyone more. But in Arnault's scheme, there can be no additional motivation. The granting of stock options thus boils down to the legal enrichment of the majority shareholder at the expense of minority shareholders."

"This is precisely the problem. Because stock options, in principle, were invented–and fiscally supported–to involve salaried executives in the capital of their company and thus make them interested in its smooth operation. By extension, they allow salaried CEOs to gradually acquire part of the capital of the company they lead. This was the case with Claude Bébéar at AXA, who received more than 1 billion francs in stock options in 1994, almost single-handedly. However, to his credit, Bébéar had created AXA himself, turning it into one of the largest companies in the world by aggregating various companies without worrying, like Arnault, about being the controlling shareholder."

"to enrich himself beyond imagination, the conductor Arnault will involve other instruments: he will simultaneously play with dividends, stock options, financial arrangements, and operations of disposals and acquisitions. And later, when the law allows it, he will use the faculty granted to companies to buy back their own shares... to destroy them. This mechanically strengthens the remaining shareholders' part, starting with himself, without costing him anything. 7."

"In the spring of 1992, Crédit Lyonnais was practically printing money. They had advanced 500 million francs to Tapie to buy Adidas, 600 million to Bolloré, taken 20% of one of Arnault's leading holdings for 520 million, and, among other generous acts, came to the aid of Pinault by buying the former headquarters of CFAO for 1.3 billion."

"The same approach was taken with Krug champagne, which was put up for sale by Rémy Cointreau, then pressured by its banks. In early 1999, Pinault studied the file to see if, with Château-Latour, entering the champagne market made sense. He believes it doesn't. Again, he calls Arnault and tells him: "You're alone, Bernard, the way is clear." This time, Arnault only thanks him half-heartedly. And on January 21, 1999, LVMH announces the purchase of Krug champagne for 1 billion francs."

"Like Arnault, Pinault will make the most of the pretension and incompetence of the socialists who have just come to power and have a purely theoretical vision of industrial policy. By proposing to take charge of the recovery of the wood industry, Pinault attracts the good graces of Alain Boublil and facilitates the settlement of his tax transaction. But it is under the right-wing government, which returned to power in 1986, that he will carry out the two major operations that will project him onto the stage:"

"PPR's blockade is due to a sudden veto from François Pinault. He too believes that Arnault is financially struggling. Above all, the use of an internal document in court, which could have been taken from the trash, has made him furious. He now knows where all the information circulating in France and England about Forest Product International, its relationship with John Ryan, and its past and present dealings with the tax authorities comes from. He knows who is stirring the pot in the conflict between France and the United States over the Executive Life file. "I will never sign an agreement with this thug," he tells his colleagues, lawyers, and visitors."

"New York Times is going to throw a stone in the pond23. In a lengthy article, the newspaper displays unprecedented severity towards Arnault's strategy. "Although he has invested money in his new treasures-often without counting-Mr. Arnault runs a decentralized empire, with no more synergies than if they were autonomous," the newspaper writes: "Several brands compete with each other, leading skeptics to wonder if Mr. Arnault has not collected well-known names for reasons of personal vanity.""

"Tellio gave a little Gallic shrug. “You have to understand that I don’t make the decisions.’ Each month, he explained, he simply presented a list of possible investments to his billionaire boss. ‘Arnault is very hands on. It’s his call.’"

"Last to enter was the ever-active Jean-Bernard Tellio from Arnault. I was a little surprised Tellio had even managed to turn up. For months now, he had been buying up stakes in internet companies all over Europe and the US. It can’t have been easy to juggle all these commitments. After agreeing to invest $1.6 million in our last funding round, funds had accidentally been sent to us twice. Tellio had seemed unruffled when we told him. ‘Oh, really,’ he said, laughing. “You'd better send one of them back.’"

"broader implications. A few months earlier, Arnault had created an investment company called europ@web in which most of his internet investments, including boo, were now held. His plan was to sell a chunk of europ@web through an IPO within the next few months and he was understandably anxious to avoid anything that might shake the confidence of an already jittery internet sector. Then waiting in the wings were Texas Pacific and"

"Listing the number of brands that have ended up in French hands becomes a painful count for those who care about the entrepreneurial future of our country: Gucci, Brioni, Pomellato, and Bottega Veneta are owned by Kering di François Pinault, the archrival of Arnault, who recently also targeted Valentino, acquiring 30% with the option to buy the rest of the shares in the coming years. Bulgari, Loro Piana, Fendi, Acqua di Parma, Emilio Pucci are the Italian brands in the LVMH portfolio, which recently also bought a stake in the holding company of Remo Ruffini that controls Moncler."