The clash of egos and pocketbooks between France's two richest men subsided momentarily yesterday, when Mr Francois Pinault triumphed over Mr Bernard Arnault in the two-and-a-half-year-old "handbag war" for control of the Italian luxury group Gucci.
Under the deal announced yesterday, Pinault-Printemps-Redoute (PPR) purchased 8.6 million Gucci shares from Moet Hennessy-Louis Vuitton (LVMH) for €896 million (£705 million).
PPR already held 42 per cent of Gucci, and has spent €4.6 billion to date for its controlling stake of 53.2 per cent of the company. PPR will finance the deal with a €700 million increase in capital and a €700 million convertible bond issue.
The three-way agreement specifies that PPR will offer $101.5 (€113) for all outstanding Gucci shares in March 2004, for a theoretical price of €11.4 billion - a "helluva" lot of handbags.
Gucci will pay an exceptional dividend of $7 (€7.79) to all shareholders except PPR before December 15th.
LVMH holds 20.6 per cent of Gucci, but announced it would sell remaining Gucci shares before the end of this year, bringing in €2.13 billion and enabling it to shed a substantial part of the €7.4 billion debt it reported last year.
LVMH nonetheless remains the world's largest luxury conglomerate, with €11.58 billion in turnover and net profits of €722 million last year.
By obtaining the majority share in Gucci, PPR becomes the world's third largest luxury group. Another French company, Richemont, which owns Cartier, remains in second place.
Yesterday's agreement brings an end to a venomous battle in which the protagonists nearly killed their mutual prey. Uncertainty over Gucci's fate had caused its share price to fall 36 per cent this year. But the price shot up 9.67 per cent, to €100.8 per share, when the deal was announced.
The saga started when the acquisitive Mr Arnault quietly swept up Gucci shares at the beginning of 1999. Mr Arnault had seized 34 per cent of the company before Gucci management appealed to his arch rival Mr Pinault to be its white knight.
Gucci staged a sudden $3 billion share issue, bought by PPR, diluting LVMH's participation to 20.6 per cent and depriving Mr Arnault of a seat on the board.
Never one to take an insult lightly - especially not from Mr Pinault - Mr Arnault filed at least five lawsuits in the Netherlands, where the Gucci group is registered.
The Dutch Enterprise Court was to have delivered its verdict on the legality of the Gucci-PPR deal this month. Mr Pinault reportedly feared the court would annul his March 1999 alliance with Gucci, which made him willing to pay a high price to buy out LVMH's stake.
"Gucci as a group did not exist before us," Ms Laetitia Olivier, a spokeswoman for PPR said. "We brought $3 billion to them - and that's a lot to go shopping with."
Since PPR moved in, Gucci has bought designers Yves Saint-Laurent, Stella McCarthy, Alexander McQueen, Oscar de la Renta and Balenciaga, and the Van Cleef & Arpels and Boucheron jewellers.
Gucci's top designer, the Texan Tom Ford, created Saint-Laurent's most recent collection and in July launched a new perfume called "Nu" (Naked) in a tasteless nude dance show inside the Paris bourse.
The battle for Gucci resembled a geo-political conflict, complete with sudden offensives, lulls, mediation and break-offs in contact.Another French tycoon, the chairman of Vivendi Mr Jean-Marie Messier, attempted to broker a peace deal in the summer of 2000.
The final treaty, according to Le Monde, was drawn up with the participation of the business consultant Mr Alain Minc and the Belgian financier Mr Albert FrΘre.
Mr Pinault is widely reported to be France's richest man. Ms Olivier of PPR said it wasn't clear whether he or Mr Arnault had more billions, though with a turnover of €24.76 billion and €767 million in net profits last year, PPR surpassed LVMH.
Like two boys locked in an endless contest to outdo each other's toys, the men invariably copy one another.
Analysts reproach Mr Pinault for venturing from his specialisation in mass distribution to compete with Mr Arnault in luxury goods - and criticise Mr Arnault for moving into mass distribution.
After Mr Pinault bought the British auctioneer Christie's, Mr Arnault purchased another British house, Phillips.
Mr Pinault plans to house his contemporary art collection in the former Renault factory on an island in the Seine; Mr Arnault will put his impressionist collection in the art deco Samaritaine department store - overlooking the Seine.
Their competition extends as far as the ElysΘe Palace. Although Mr Pinault has known Jacques and Bernadette Chirac far longer, Mr Arnault has built his friendship with the first lady on patronage of the arts and charitable foundations.
