CAEA 3231 CAEA 3231 Integrated Case StudyIntegrated Case Study
Group Members:
KOK KEAN TEONG CEA070059
MOH JIA WEI CEA070084
NEO CHING HUP CEA070109
ONG KAH HOEY CEA070157
TEO SILK KEONG CEA070197
The Battle of TakeoverThe Battle of Takeover
Introduction of TakeoverIntroduction of Takeover
Friendly TakeoverFriendly Takeover
Hostile TakeoverHostile Takeover
Hostile TakeoverHostile Takeover
Procedures Involved in TakeoverProcedures Involved in Takeover
Hostile Takeover Defense Hostile Takeover Defense StrategiesStrategies
IntroductionIntroduction
Gucci Group NV (Target Company)◦Italian company ◦Incorporated in Netherland ◦Sells French Fashions◦CEO: Prior 2004> Mr. Domenico De Sole◦2004 until now>Mr. Robert Polet◦Stocks traded on NYSE and Amsterdam Stock
Exchange
IntroductionIntroduction
LVMH Moet Hennessy Louis Vuitton SA (Attacker)◦World largest luxury group◦French company ◦Incorporated in Paris◦Sells French Fashions◦CEO: Mr. Bernard Anault ◦Stocks traded on Nasdaq Stock Market Trading
and Paris Stock Exchange
IntroductionIntroduction
PPR-Pinault Printemps Redoute SA ( White Knight)◦World 3rd largest luxury group◦French company ◦Incorporated in Paris◦Europe largest non food retail group◦CEO: Mr. Francois Pinault◦Stocks traded on Paris Stock Exchange
History: 1923-1989History: 1923-1989
1923-1953
History: 1989-1995History: 1989-199550% 50%
19931995- Go Public
The Start of the Battle (1999)The Start of the Battle (1999)
The Start of the Battle (1999)The Start of the Battle (1999)
Ways to amass 34.4% of stakeWays to amass 34.4% of stake
The Start of the Battle (1999)The Start of the Battle (1999)
The Difference Regulations The Difference Regulations between Countriesbetween Countries
The Start of the Battle (1999)The Start of the Battle (1999)
Analysts’ ViewAnalysts’ View
Reasons to take control over Gucci:◦LVMH damaged by turmoil in Asia and losses at
its retail division
◦Gucci is seen as undervalued, strongly managed, and having potential growth
◦Gucci is geographically attractive
◦Gucci has higher % of sales in US
The Real ReasonThe Real Reason
The Start of the Battle (1999)The Start of the Battle (1999)
The Start of the Battle (1999)The Start of the Battle (1999)
The Standstill Agreement between The Standstill Agreement between PPR and GucciPPR and Gucci
Strategic Investment Agreement◦PPR is allowed to increase stake to 42% and
disallowed to increase any stake >42% in 5 years time
◦PPR is allowed to increase max 10.1% stake if LVMH increase its stake in Gucci
◦If LVMH launch full bid, PPR has option to sell all shares or offer higher bid to buy Gucci
◦Gucci can acquire Yves Saint Laurent and other perfume Lines from PPR for $ 1 billion
The Process of Full Takeover BidThe Process of Full Takeover Bid
Court’s DecisionCourt’s Decision
Gucci is guilty for mismanagement in terms of timing (article 2:8 of the civil code )
ESOP is invalid
PPR’s 42% stake in Gucci is valid
Dutch Supreme Court’s DecisionDutch Supreme Court’s Decision
held that the enterprise chamber was wrong in finalized any decision without an official inquiry
The chamber then appointed 2 Dutch Lawyers and a former CEO of a large financial institution as official investigators
Peace NegotiationsPeace Negotiations
LVMH, Gucci and PPR met at offices at Darrois Villey in Paris
Came out with a settlement agreement and revised Strategic Investment Agreement
The Settlement AgreementThe Settlement Agreement
PPR spent $812 million to buy 8.6 million shares from LVMH at a price of $94 per share (a $2 premium) and making PPR own 53.2% of Gucci
A special dividend of $7 per share will be given to all shareholders except PPR
PPR will buy all shares which does not belongs to PPR at $101.50 in 2004
PPR has the right to a majority of the board and designate the chairman after the completion of the offers in 2004
LVMH will forgo all of the legal claims against Gucci and PPR
The End of the Battle (2001)The End of the Battle (2001)
LVMH – capital gain of 760 million euro
Gucci- no longer under attack and able to do a lot of acquisitions
PPR- able to get full control over Gucci in 2004
Changes in Structures Prior and Changes in Structures Prior and After the Takeover ProcessAfter the Takeover Process
Share PriceShare Price
Source: Moneycentral.msn.com
Share PriceShare Price
Share Price: Annual 2002-1998
Year NYSEHigh
US$Low
EuronextAmsterdam
High €
Low2002 99.4 82.5 110.9 83.92001 94.7 66.7 109.1 66.52000 116.2 72.9 122.0 81.41999 121.5 61.0 121.9 56.61998 75.3 31.5 65.0 26.1
Source: SEC report on 31/7/2003
Capital StructureCapital Structure
IAS Financial Data of Gucci 1998-2000 (in Euro Million)
Source: SEC report on 31/7/2003
Top ManagementTop Management
Name Position Age
Year of Initial
ElectionDomenico De
Sole Chairman 59 1995
Tom Ford Vice Chairman 41 2002
Aart Cooiman Member 61 1995
Members of the Management Board (July 1, 2003):
Top ManagementTop Management
Name Position Age Year of Initial
ElectionAdrian D.P. Bellamy Chairman 61 1995Patricia Barbizet Member 48 1999Aureliano Benedetti Member 67 1995Reto F. Domeniconi Member 67 1997Patrice Marteau Member 55 1999François Henri Pinault Member 40 2001Karel Vuursteen Member 61 1996Serge Weinberg Member 52 1999
Members of the Supervisory Board (July 1, 2003):
Business StructureBusiness Structure
Business StructureBusiness Structure
Corporate Financial PerformanceCorporate Financial Performance
Revenue (Euro Million)
Source: SEC report on 31/7/2003
Corporate Financial PerformanceCorporate Financial Performance
Operating Profit (Euro Million)
Source: SEC report on 31/7/2003
OwnershipOwnership
Name
No. of Shares
Beneficially Owned
Percent of Outstanding
Share Capital
Pinault-Printemps-Redoute S.A. 64,233,996 64.6 %
Crédit Lyonnais S.A. 11,484,609 11.5 %
Share Ownership (as a % of shares outstanding on July 1, 2003)
Source: SEC report on 31/7/2003
Analysis of Similar Major Analysis of Similar Major Takeover That Wasn’t Takeover That Wasn’t
SuccessfulSuccessful
Impact of Takeover Failure to Impact of Takeover Failure to IndustryIndustry
Impact of Takeover Failure to Impact of Takeover Failure to EconomyEconomy
ConclusionConclusion