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A high-stakes board-room drama with all the intrigue, glamour and bold moves of a Hollywood plot has captivated the French business community this summer.
The players include some of the country's best-known corporate families - names like Vuitton, Moet, Hennessy and Chandon. They are famous for prestigious labels like Hennessy Cognac, Moet & Chandon champagne and Vuitton luggage.
At issue is control of the world's largest luxury-goods conglomerate, a company now called LVMH Moet Hennessy-Louis Vuitton, usually shortened to LVMH.
The LVMH saga also features a hot new star, Bernard Arnault, the 39-year-old French industrialist who announced on Thursday that he had become LVMH's largest shareholder. Last week alone, Mr. Arnault's forces spent about $600 million to increase their holdings in LVMH to 37 percent, hastening the day when he will probably be able to take charge of the conglomerate. Arnault to Choose Sides
He may not be ready to take over yet, but he has become the pivotal figure in the feud over how the venerable family interests should control the company.
An extraordinary LVMH shareholder meeting scheduled for this Thursday could resolve the matter. The Paris financial community has been busy speculating whether Mr. Arnault will come down on the side of the Vuitton family or the Moet, Chandon and Hennessy clans. The Vuitton faction originally invited Mr. Arnault to buy into LVMH as an ally. But Mr. Arnault has recently appeared to ally himself with the rival Moet-Chandon-Hennessy faction.
Whichever side he chooses, financial analysts say Mr. Arnault, who controls the Christian Dior and Christian Lacroix fashion houses, seems well on his way to becoming chairman of the LVMH empire one day, thanks to his huge corporate holdings and a war chest that will allow him to make even more acquisitions.
''The goal I have fixed for myself was to make our group the leading luxury group in the world,'' said Mr. Arnault, a formal, soft-spoken executive, in his pastel gray office at Christian Dior's headquarters. ''I'd say we're well on our way.''
Just four years ago, Mr. Arnault was a little-known businessman, liv-ing in New Rochelle, N.Y., and working for the American subsidiary of his family's modest real estate business.
He returned to France in 1984, eager for new challenges. So he bought a nearly bankrupt company, Agache-Willot-Boussac, which was a hodgepodge of retailing, fashion and manufacturing.
Mr. Arnault quickly turned it into a treasure trove. The company he acquired owned the famous Left Bank department store, Bon Marche, and the Conforama retailing chain. But its jewel was the Dior fashion house. It also owned a plastic manufacturing operation and Peaudouce, a leading manufacturer of disposable diapers. Corporate Turnaround
Mr. Arnault renamed the company Financiere Agache, and nursed it back to health. He sold some ailing operations and cut costs in others. As a result, Agache earned $112 million on revenue of $1.9 billion last year.
''We had a great deal of faith in his talents and that is why we backed him,'' said one of the many bankers who finance the Arnault empire.
Mr. Arnault also found time to do some luxury shopping. Last year, he bought Celine, a clothing and leather goods company. He also bankrolled the young designer Christian Lacroix, who was the sensation of Paris fashion last year.
While Mr. Arnault was building his base, Moet Hennessy was merging with Vuitton, a deal that was consummated last year and created LVMH Moet Hennessy-Louis Vuitton. Tensions at LVMH
Henry Racamier, the 77-year-old chairman of Louis Vuitton and No. 2. at the newly formed LVMH, was impressed by Mr. Arnault. In June, Mr. Racamier asked Mr. Arnault to buy some LVMH shares and join forces with him. That was after Mr. Racamier had a run-in with Alain Chevalier, the LVMH chairman and head of Moet Hennessy before the merger.
The two men - both highly respected for their success in building well-oiled luxury goods empires -had a falling out in June when Mr. Chevalier surprised Mr. Racamier by suggesting that LVMH allow Guinness P.L.C. to buy 20 percent of LVMH stock to help prevent any hostile takeover. This suggestion shocked Mr. Racamier, who grew alarmed that such a move would tip LVMH too heavily in favor of the drinks business. In addition, there were some tensions between the two men about marketing strategies.
Mr. Chevalier and Anthony Tennant, Guinness's chairman, were close friends, and on the day that Moet Hennessy announced its merger with Vuitton, it also announced a joint distribution agreement with Guinness, which sells Johnny Walker Scotch whisky and Gordon gin.
''Guinness is one place where we had a difference of opinion,'' Mr. Racamier said in an interview. ''It is not a drama, however. The whole thing has been exaggerated.'' Shifting Allegiances
After Mr. Racamier sought to enlist Mr. Arnault to help counter LVMH's beverage bias, Mr. Arnault turned to his investment banker, Lazard Freres et Compagnie, for advice. It just so happened that Lazard Freres was also Mr. Chevalier's investment adviser.
Lazard Freres brought Mr. Arnault and Mr. Chevalier together, and after a late-night meeting Mr. Arnault seemed to switch allegiances. On July 8, he announced a joint venture with Guinness - 60 percent of which would be controlled by Agache - that would buy 27 percent of LVMH.
''I always thought that Arnault was very ambitious,'' said Francois Badelon, an analyst with Patrick du Bouzet, a Paris stockbroker. ''He has done great things with Agache. But to move to a higher level, I always thought he had to move to a great group.''
That, many Arnault watchers say, is why he swooped in on LVMH, which owns the world's No. 1 champagne, No. 1 cognac and the rights to Christian Dior and Givenchy perfume. LVMH earned $213 million on revenues of $2.1 billion last year. Increased Stock Holdings
Mr. Arnault and his Guinness partners last week increased their stock and warrant holdings to 37 percent of LVMH's capital, from 27 percent. Some analysts said that the Vuitton forces were rumored to be moving to increase their holdings and that in reaction Mr. Arnault was seeking to obtain 33 percent of the voting rights, which would give him a blocking minority, to help Mr. Chevalier.
''Racamier wanted to pick up more stock and he forced Chevalier, Agache and Guinness to act,'' said Susanna Hardy, an analyst with DLP James Capel in Paris.
Mr. Racamier said he still considered Mr. Arnault an ally, but he declined to comment on whether Vuitton - with 23 percent of the shares and 30 percent of the voting rights -had bought more shares this week.
Some critics say Mr. Arnault just might seek to oust the 57-year-old Mr. Chevalier so that he could take LVMH's reins and become the undisputed champion in the world's luxury goods arena. 'That Would Make Him Look Bad'
''Mr. Arnault is ambitious, but not so ambitious that he would do that,'' one LVMH official said. ''That would make him look bad because Mr. Chevalier is so respected in French business circles. He can always wait a few years until Mr. Chevalier retires.''
Mr. Badelon, the analyst, added, ''If Mr. Arnault seeks to force out the management, the families can always band together to stop him.''
At Thursday's meeting, LVMH shareholders are expected to vote to change the corporate structure so that the board would be replaced with a less powerful supervisory board. Many analysts say that in an effort to establish a truce, the new board would have 12 members - four representing the Moet, Chandon and Hennessy families; four representing Vuitton interests, and four representing the Arnault-Guinness alliance.
Mr. Chevalier is expected to be named president of the managing group. In an interview, Mr. Racamier said he would be the No. 2, but added that Mr. Arnault would also probably be a member. 'I'm the Principal Shareholder'
Mr. Arnault called Mr. Chevalier an excellent manager. ''I agree with his strategies,'' he said. ''His problem is that he is not a major shareholder. In the businesses I manage, I'm the principal shareholder, and that helps me control the situation.''
In building his empire, Mr. Arnault seems to make sure he is in control of every block. He and his family have a 40 percent stake in Financiere Agache, and two investment banks that are close to him - Lazard Freres and Worms et Compagnie -each have 10 percent. To gather a war chest, he sold 42 percent of Christian Dior to the public this year for $520 million, but Agache remains majority holder.
All of which leads the Paris financial community to suspect that Thursday's shareholder meeting will not be the last time they hear about Mr. Arnault and the control of LVMH. Key Players in the Board-Room Drama LVMH Moet Hennessy-Louis Vuitton: Luxury goods conglomerate formed after Moet Hennessy and Louis Vuitton merged in 1987. Moet Hennessy: Company famous for Moet & Chandon, Ruinart and Mercier champagnes and Hennessy cognac. Also owns Christian Dior perfume line. Louis Vuitton: Prestigious luggage company that also owns Veuve Clicquot champagne and Givenchy perfume line. Financiere Agache: Fast-growing retail and fashion company that owns Bon Marche and Conforama department stores and controls Christian Dior and Christian Lacroix fashion houses. Alain Chevalier: The 57-year-old chairman of LVMH and long-time manager of Moet-Hennessy for Moet, Chandon and Hennessy families. These families have 14 percent of LVMH stock and about 25 percent of voting rights. Henry Racamier: The 77-year-old vice chairman of LVMH and long-time head of Louis Vuitton company. Before this week, the Vuitton faction had 23 percent of LVMH stock and 30 percent of voting rights. Bernard Arnault: The 39-year-old chairman of Financiere Agache. Through joint venture with Guinness P.L.C., he controls 37 percent of LVMH stock, fully diluted. Lazard Freres et Compagnie: Paris-based part of the Lazard Freres investment banking network. Adviser to both Mr. Chevalier and Mr. Arnault