Arnault expands perfume empire: LVMH buys controlling stake in Guerlain

BERNARD ARNAULT, chairman of the LVMH luxury goods group, is expanding his perfume empire with the purchase of a controlling stake in Guerlain, the perfume and cosmetics company.

LVMH is paying Fr1.96bn ( pounds 233m) for a 51.2 per cent stake in Djedi, the family company that owns 85.8 per cent of Guerlain, valuing the company at Fr4.4bn. The remaining Guerlain shares have been owned by LVMH since 1987 and yesterday's purchase will take its stake up to 59 per cent.

The deal will leave the Guerlain family with a 12 per cent stake in Christian Dior, the fashion and perfume business which is part of the LVMH empire and which is issuing 4.35 million shares to finance the deal. Eric Guerlain, one of the family members, will join Dior's board.

LVMH will purchase the Djedi shares from Dior, giving it control of three of the key international perfume brands - Dior, Givenchy and Guerlain. Mr Arnault has always made clear that he intends to expand his interests in luxury goods worldwide, both by acquisition and organic growth. A spokesman said he believed that LVMH's financial strength, combined with its international distribution network and experience of managing luxury goods, would bring benefits to Guerlain.

'LVMH has the resources to put behind international product development and promotion,' the spokesman said.

Guerlain's net income in 1993 was Fr162m on sales of Fr2bn - putting the price on a multiple of about 22. LVMH said that this result was likely to be in line with the average net income in the last two years, Fr191m.

The deal is subject to approval by Dior's shareholders on 29 June. They will also consider plans to raise the funds to finance the purchase of Jacques Rober, which owns 44.6 per cent of LVMH, from Guinness as part of a deal ending the ties between the two companies.

(Photograph omitted)