PROFILE: Bernard Arnault - The LVMH man

 

I have always been fascinated by businessmen. In this post, I write to highlight a brilliant businessman and corporate investor, who although amongst the world’s richest men, is not very well known or talked about.

“The Terminator”

Bernard Arnault is France’s richest person and is the chairman of the world’s largest maker of luxury goods, Moet Hennessey Louis Vitton. He controls about half of LVMH, which had revenue of 64.2 billion euros ($76 billion) in 2021.  In 1984, Arnault, then a young real estate developer, heard that the French government was set to choose someone to take over the Boussac Saint-Frères empire, a textile and retail conglomerate that owned Christian Dior. With the help of Antoine Bernheim, he acquired Financière Agache, a luxury goods company. He became the CEO of Financière Agache and subsequently won the bidding war for Boussac Saint-Frères, buying the group for a ceremonial one franc effectively taking control of Boussac Saint-Frères.   He laid off 9,000 workers in two years, after which he acquired the nickname “The Terminator” He then sold nearly all of the company’s assets, keeping only the Christian Dior brand and Le Bon Marché department store By 1987, the company was profitable again and booked earnings of $112 million on a revenue stream of $1.9 billion dollars

The billion-dollar idea

In the 1980s, Arnault had the idea to create a group of luxury brands. He worked with Alain Chevalier, CEO of Moët Hennessy, and Henry Racamier, president of Louis Vuitton, to form LVMH in 1987. In July 1988, Arnault provided $1.5 billion to form a holding company with Guinness that held 24% of LVMH’s shares. As a response to the rumours of creating a “blocking minority”, Arnault spent another $600 million to buy a 13.5% more stake in Louis Vuitton. Arnault’s views and mission by then greatly differed from Henry Racamier, Louis Vuitton’s president. In January 1989, he spent another $500 million to gain control of a total of 43.5% of LVMH’s shares and 35% of its voting rights. With the new stake, he was able to reach the “blocking minority” and was successful in dismantling the LVMH Group. He then turned on Racamier, stripped him of his power and ousted him from the board of directors, He subsequently became the unanimous chairmen of the company.

Ambition, Strategy, Drive & Growth

Upon Arnault’s takeover, in eleven years, annual sales and profit rose by a factor of 5, and the market value of LVMH increased by a factor of 15.  What followed was a string of strategic acquisitions. In July 1988, Arnault acquired Céline. LVMH acquired Berluti and Kenzo in 1993.  Arnault bought out the French economic newspaper La Tribune in 1993. Despite the 150 million euros he spent on acquiring the company, he sold it off in order to buy another French economic newspaper Les Échos, for 240 million euros. In 1994, LVMH acquired the perfume firm Guerlain. In 1996, Arnault bought out Loewe, followed by Marc Jacobs and Sephora in 1997. Five more brands were also integrated into the group: Thomas Pink in 1999, Emilio Pucci in 2000 and Fendi, DKNY and La Samaritaine in 2001. In the 1990s, Arnault decided to develop a centre in New York to manage LVMH’s presence in the United States. The result was the LVMH Tower which opened in December 1999.

M&A to preside over the biggest rivalries

In 1999, Arnault turned his attention toward the Italian Luxury Brand, GUCCI. He discreetly amassed a 5% stake in the company before being detected. When Gucci responded claiming it to be a hostile takeover, Arnault upped his stake to 34.4 percent while insisting he wanted to be a supportive and unassertive stakeholder. Domenico De Sole, the CEO of the Gucci group, discovered a loophole that allowed him to issue shares with only board approval, and for every share LVMH bought, he created more for his employees, diluting Arnault’s stake. The fight dragged on until settlement in September 2001. After the legal ruling, LVMH sold its shares and walked away with $700 million in profit

The luxury behemoth

On 7 March 2011, Arnault announced the acquisition of 50.4% of family-owned shares of the Italian jeweller Bulgari, with the intention to make a tender offer for the rest, which was publicly owned. The transaction was worth $5.2 billion. In 2011, Arnault invested $641 million in establishing LCapitalAsia. In February 2014, Arnault entered into a joint venture with the Italian fashion brand Marco De Vincenzo, taking a minority 45% stake in the firm. By January 2018, Arnault had led the company to record sales of 42.6 billion Euros in 2017, 13% over the previous year, as all divisions turned in strong performances. Under Arnault’s leadership, LVMH has grown to become the largest company by market capitalization in the Eurozone, with a record of 313 billion euros ($382 billion) as of May 2021 For a very brief period on 24 May 2021, Arnault temporarily became the richest man in the world, surpassing Jeff Bezos with a net worth of 187.3 billion dollars