Minor Stake Acquisition by Bernard Arnault in Richemont: Analysis

On Tuesday, June 25, Bloomberg Business and the Financial Times reported Bernard Arnault’s minor stake acquisition in the Swiss group Richemont, citing two people close to the matter. Richemont’s shares rose by up to 3.1% in Zurich on Tuesday before stabilizing at 142 Swiss francs. Notably, Richemont’s shares have appreciated by 23.24% since the beginning of 2024. “It is clear that this can have a positive impact on the Richemont group, as the group represents more than 3% of the SMI; the Swiss stock market is consequently also positively impacted by this operation. This aligns with the shareholding concentration,” explains Arthur Jurus, Head of Investment Office, Private Wealth Management at ODDO BHF Switzerland, contacted this morning.

No details on the number of shares or the type of financial vehicle used were mentioned. However, it is interesting to recall that during the annual results presentation of LVMH earlier this year, Bernard Arnault publicly expressed his admiration for Johann Rupert and his management of the group: “Allow me to conclude on Richemont and Mr. Rupert, whom I consider an exceptional leader. I have no desire to disrupt his strategy; I understand that he wishes to remain independent, and I think that is very good. And if he needs support to maintain his independence, I will be there,” he said.

It is interesting to note that this small stake could be a signal in this direction, especially since Johann Rupert's succession, who holds 51% of the voting rights and 10.2% of Richemont's capital, is still to be established. Nothing is left to chance by the two men, and it is likely that they have discussed this matter. However, this small stake is not expected to be significant in voting rights. Nonetheless, it is certain that Bernard Arnault is closely watching the success of the Cartier brand, now the second-largest watchmaker behind Rolex, according to the Morgan Stanley report.

Another much more significant stake acquisition is the one by L Catterton, the investment company owned by the French luxury giant LVMH, in Tod’s. Indeed, L Catterton announced on May 8 that it had acquired a majority stake in the luxury shoe company Tod’s, facilitating its delisting. The operation was carried out in agreement with Tod’s principal shareholder, the Della Valle family. The investment fund acquired 8,656,066 shares of the company founded by the eclectic businessman Diego Della Valle. The operation was finalized without obstacles by exceeding the 90% threshold required for delisting a company from the stock market (the acquired shares are added to those of the Della Valle family and the LVMH group).

Another holding, Financière Agache, a company related to Bernard Arnault and the family holding that owns 96% of the Christian Dior family holding and 42% of LVMH — and has been headed by Frédéric Arnault, one of Bernard Arnault's five children, since a few months ago — bought 335,322 shares on the market for 270 million euros in March 2023. Two days ago, this same holding acquired 21,224 shares of LVMH MOET HENNESSY-LOUIS VUITTON at a unit price of 706.7174 euros.

In France, since the dissolution of the National Assembly, the CAC 40 has lost value. Arthur Jurus comments: “The real issue today is the implications of the political context in France on stock values. The CAC 40 has lost at least -5% and LVMH -2%. Of course, the French domestic market only represents 8% of the LVMH group. Resilience is still there, as for luxury, but markets dislike the current instability. This can benefit the Swiss stock market and the franc. This can, therefore, encourage investors to direct flows to Switzerland. The Richemont group can perfectly benefit from this.”

What are the prospects for the Richemont group in the coming months? According to Oddo Bank and Arthur Jurus: “A still difficult Asia should weigh on Richemont’s revenue growth in the first quarter of the fiscal year ending in March 2025. We still expect positive growth for the jewelry houses. We expect the revenue for this period, which will be known as of July 16, to be marked by the persistent weakness of sales in Asia. In the last quarter ended in March 2024, the group's revenue recorded an overall increase of +2% y/y ccs with an Asia-Pacific region at -12% (the group also indicated that total Chinese spending, onshore and offshore, had declined by -15% over the quarter). We should not count on an improvement given the recent indications concerning China and also a difficult comparison base (y/y ccs growth of 40% last year after 25% in the previous quarter). We have lowered our forecast for the region from -8% to -14% for Q1. Although we have raised our estimates for Japan and the Middle East, the total group revenue growth at constant exchange rates for this quarter is now expected to be +0.7% compared to 2.9% previously.”