Financière Agache

"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."

"A year later, on February 18, 1988, the Paris Commercial Court ordered Financière Agache and Christian Lacroix to pay a provisional compensation of 10 million francs to Jean Patou for unfair competition. In its findings, the court notably underlined that "the extreme speed of the decisions [...] clearly shows that this entire construction was carried out to allow [Christian Lacroix] to do what he could not have done if he had only been free on May 2, at the end of his notice period, to present his first collection in July, advancing by six months the realization of turnover and benefiting fully from the impact of the Patou collection, well-received by critics, by transforming it into a Lacroix collection from a publicity standpoint [...] while preventing Patou from ensuring its commercial success.""

"It is better to deal with God than with his saints. The Moët-Hennessy clan reacts like Chevalier: since Racamier opened the door to Arnault, they might as well deal directly with him! A royal path thus opens up before the boss of Financière Agache. Especially since David Dautresme recovers 12% of the capital of LVMH, just by making a few phone calls. These securities are, in fact, in the hands of the six investors to whom the OBSA issued by Moët-Hennessy in 1987 had been placed. Since then, these securities have discreetly remained parked in these six parking lots: UAP, Caisse des dépôts, Crédit agricole, Worms Bank, BNP and... Lazard, lead manager of the operation. Dautresme is thus negotiating with these establishments the conditions for the sale of these OBSA to Bernard Arnault. But the sellers must not appear, as it was stipulated that these securities had to be placed in the general public. Also, once the terms of the transaction are agreed upon, they will be invited to go through a discreet Belgian-Luxembourg intermediary, Belmavobel International Securities."

"This document has one merit: it shows that it was Henry Racamier who went to fetch Bernard Arnault. And it gives the latter legitimacy to at least set foot in LVMH, without prejudice to the betrayals and counter-betrayals of others later on. "From the start, I was deceived," Bernard Arnault would later assert. The principles are set: execution will take the form of a friendly takeover bid for 30% of LVMH's capital, as allowed by law at that time. The shares will be purchased by Financière Agache at a price of 3,000 francs and brought to a joint company owned equally by the two allies. The day of the assault is set for Monday, June 27. This takeover bid was concocted by André Battestini of Paribas, who advises Racamier. Lazard is not in on the deal. This crime of high treason (and self-interest) will have serious consequences."

"His 36% stake in Financière Agache is held by Férinel, which changes its name for the first time (a practice that will become systematic to confuse matters) to Arnault and Associates SA. He then offers financiers a 49% stake in this new company."

"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 head of Louis Vuitton and the head of Financière Agache sign a six-point protocol to jointly take control of LVMH. The document exists in only two copies and has only four pages. Each term has been weighed. It states in the preamble that "given the project under way to introduce a foreign shareholder to a significant extent into the capital of LVMH, a project carrying a very great danger in the long term for the unity and integrity of the company, Messrs. Racamier and Oligastro have deemed it necessary, for the protection of the company and its shareholders, especially the Vuitton family, to approach the Arnault group... The intention of the two parties is to maintain the LVMH group's belonging to the typically French domain of high quality and prestige, as well as to protect it against the risks of dismantling2"

"Before even finalizing the Jacques Rober deal, Financière Agache and Guinness start buying LVMH shares on the stock market. On July 4th and 5th, they scoop up more than 10% of the capital in front of stunned traders who don't know what's going on. With the addition of the OBSA, the Franco-British tandem potentially holds 24% of LVMH."

"How did the man who was, only five years earlier, an obscure CEO of a small company manage, with an initial stake of 40 million francs, to become the CEO and main shareholder of the leading French luxury company? To attack LVMH and acquire 28% of its capital, Financière Agache put more than 21 billion francs on the table!"

"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."

"Simple in theory, the operation is actually much more complicated in practice2. In order to maintain control over Le Bon Marché, it is imperative that Arnault strengthens his majority in the company beforehand. How? Le Bon Marché, which is absorbing Conforama, must compensate for this contribution with new shares given to the contributor, namely Financière Agache. The larger the contribution in relation to the absorbing company, the more shares the contributor receives, and therefore the higher their participation in the new company. Thus, the operation is based on the evaluations of Conforama and Le Bon Marché. The former is given a flattering value corresponding to a share price that multiplies profits by 17.5, whereas the norm in the distribution sector is around 13-14. The latter, on the other hand, is not as impressive. Its buildings, which constitute its main asset, are evaluated based on a pessimistic price per square meter of around 20,000 francs, which seems low for the Sèvres-Babylone neighborhood where they are located. According to the expert commissioned by Financière Agache, their total value would be 1.2 billion. However, a few weeks earlier, Bernard Arnault himself had been more optimistic about Le Bon Marché in an interview with Fortune magazine: "The 100,000 square meters of floor space in the 16th arrondissement of Paris are worth at least 2 billion francs." In any case, the chosen method of calculation now allows him to control Le Bon Marché not at 65.53%, but at 89.96%."

"To understand the reasons for this enrichment, Antoine Gaudino dissected the operations that took place in 1993 and 1994 between the Compagnie Financière du Nord and the Worms group, which sold its subsidiary Financière Truffaut to the former for 800 million francs. Through a complicated scheme, involving mergers, capital reductions, asset transfers from Jacques Rober, Guinness France between Financière Agache on one side, Christian Dior on the other, latent losses would have been lodged with Christian Dior (at the bottom of the cascade) and capital gains with Financière Agache (at the top), according to Antoine Gaudino. He estimates that the "capital gain that should have been recorded in favor of [...] Christian Dior" was 573.6 million francs and claims that it "was diverted by Financière Agache during its intervention on April 29, 1994, just before Christian Dior took over Guinness France.""

"On April 29, 1994, the Christian Dior and LVMH shares were sold by Guinness to Financière Agache for 11.7 billion francs, while their stock market value that day was 16.911 billion, representing a loss of more than 5 billion for Guinness! In reality, this loss is only apparent. Guinness received 3.7 billion in cash but also 34% of Moët-Hennessy, until then a 100% subsidiary of LVMH, with an estimated value of 8 billion francs. However, this stake was also "obtained at a significantly undervalued price," asserts the Gaudino report, which, in the absence of accounting documents, establishes an evaluation of Moët-Hennessy by comparing the operating results with those of LVMH and its stock market value. From these calculations, it appears that Guinness benefited from an undervaluation of the price of Moët-Hennessy shares for a total amount of 7 billion francs. "This loss was clearly incurred to the detriment of the minority shareholders of LVMH, who held the sold Moët-Hennessy shares." In other words, by selling its LVMH and Christian Dior shares to Financière Agache below their price on the one hand and, on the other hand, by acquiring LVMH shares of Moët-Hennessy, also undervalued, Guinness would have made a neutral operation, but would have massively enriched Bernard Arnault (shareholder of Financière Agache). This contested operation led to the almost doubling of Christian Dior's interest percentage in LVMH, which rose from 24% to 40.75%."

"How is it that LVMH did not appear during the threshold declarations at the time of the wave of Bouygues share purchases in 1999? Already, its presence was masked by a sleight of hand. In December 1999, LVMH loaned to Financière Agache, another head company owned 100% by Groupe Arnault, the 3.11% of Bouygues acquired that year. "When LVMH, a listed company and star of the CAC 40, crossed the 5% threshold in Bouygues, there was no declaration because its shares were assimilated to those of Groupe Arnault, which indirectly controls LVMH and had already crossed this threshold," write Les Échos. As a result, LVMH did not appear in the notice of the Financial Markets Council mentioning, at the end of 1999, the crossing of the 10% threshold of Bouygues' capital by Groupe Arnault."

"The Arnault Group operates on the principle of a cash pool, controlled and managed by Financière Agache: all companies, from top to bottom of the hierarchy, contribute funds or withdraw them according to their needs. In 1999, Montaigne Participation et Gestion (MPG), the head company of Bernard Arnault, borrowed 3 billion francs from the cash pool. Markas BV, one of the Dutch companies that holds stakes in Internet companies, received 4.3 billion francs. This blurs the line between different entities, although there is nothing illegal about it since the interest rates paid by one party or the other are the same."

"On Wednesday, October 26th, Bernard Arnault chose the general assembly of his flagship company (Financière Agache) to announce his plans: now that he holds a blocking minority in LVMH, he will restructure his distribution group (Bon Marché, Belle Jardinière, Conforama) inherited from Boussac around a clear organizational chart with the goal of raising capital. The plan: Bon Marché becomes the parent company of Conforama, of which it will own 86.5% of the capital, and strengthens its stake in Belle Jardinière to 75.7%. At the end of the operation (see table 2), the whole group will combine a large real estate capital (about 100,000 square meters for Bon Marché alone) with a significant distribution force. It will represent nearly 300 million francs in net profits in 1988 for a turnover of over 7 billion francs. This structure will allow Bernard Arnault to appeal to the market under good conditions. He plans to proceed with a capital increase of 2.4 billion francs, which will be reinvested in Christian Dior."

"On September 15th, a statement from Financière Agache made it clear: Jacques Rober holds 32% of the capital. Considering the Obsa he possesses, his participation amounts to 37.4% after dilution, but more importantly, Bernard Arnault is approaching the blocking minority in voting rights, a blocking minority that until now only the Vuitton clan possessed."

"In the case of Bernard Arnault, Groupe Arnault will control 85.6% of Financière Agache, which holds 98.6% of Bon Marché Holding, itself holding 58.9% of Christian Dior, a 100% shareholder of Financière Jean Goujon, the principal shareholder with a 42.5% stake in LVMH. Historically, this system of "poulies bretonnes" has sometimes been criticized for favoring opacity in the financial situation of the groups in question, with the debts of the parent companies often being "transformed" into equity in the entities located on lower levels."