THE battle for Gucci, one of the hottest fashion labels of the 1990s, took dramatic twists yesterday.

Early in the day, French industrialist Mr Francois Pinault emerged as a white knight, with an agreed offer for a 40 per cent stake. Rival luxury goods group LVMH, which had been hoping to gain control of Gucci with a 34.4 per cent stake, responded hours later by making a full bid.

LVMH's offer of $85 cash for each share values Gucci at $5.07 billion (€6.43 billion). The Gucci board, which has been at loggerheads for months with Mr Bernard Arnault, the LVMH chairman, will meet tomorrow to decide whether to accept it.

Gucci's shares were already up €3.10 ($3.41), or 4.85 per cent, to €67 in Amsterdam following an announcement that Pinault-Printemps-Redoute (PPR), a retail group controlled by Mr Pinault, was offering $75 each for 39 million new shares, worth a total of $2.9 billion. The offer, orchestrated by Morgan Stanley, which advises both Gucci and Mr Pinault, was intended to block LVMH. It has been trying to influence Gucci's affairs since purchasing 20 million Gucci shares (then 34.4 per cent of the equity) for $1.4 billion.

Mr Pinault also announced yesterday that he had agreed to acquire the beauty business belonging to Sanofi, the French pharmaceuticals group, for 6 billion French francs (€914.7 million) including FFr1 billion debt. He intends to buy that business, including the Yves Saint Laurent brands, through Artemis, his private company, and then sell it to Gucci for the same price.

LVMH tried to buy it from Sanofi last autumn, but could not agree terms. Gucci hailed the beauty acquisition as the first step towards building a portfolio of luxury brands, which could be revitalised by its management team, led by Mr Domenico De Sole, president, and Mr Tom Ford, chief designer.

Early yesterday afternoon, Mr De Sole described his response to the Pinault accord as "absolutely ecstatic". He added: "Our people in Italy went ballistic with joy at the news. I've been taking insults from them (LVMH) for three months and just want to go back to running the business."

An hour later, he received a letter from Mr Arnault, making a formal offer to acquire 100 per cent of Gucci.