FTSE in-depth: Hermès shares back in fashion

 

As Burberry dropped 34p more to 1278p on fading bid hopes (after French retailing giant PPR said on Tuesday it was absolutely not interested in bidding for the thriving £5.6bn London-based fashion house), dealers were happy to hear that another mega-bid was brewing in the super-rich luxury goods sector.

Geoff Foster

Geoff Foster: Moody's warning that Britain is at risk of losing its prized triple-A rating hurt shares.

LVMH, the French group run by billionaire Bernard Arnault, is said to be lining up a knock-out €350-a-share cash bid for Hermès, which has long been famous for persuading celebrity shoppers such as Victoria Beckham and Sharon Stone to fork out more than £3,000 for its Birkin bags.

Hermès stock was changing hands at about €188 (£167) a pop amid growing speculation that the Dumas family, which owns over 50% of the 174-year old company, will find LVMH's premium offer too good to refuse.

LVMH revealed back in December it had increased its stake in Hermès to 21% and ever since bulls have been of the opinion that the ultimate arm-candy group's days of independence were numbered.

LVMH began building a stake in Hermès in 2008 while continuously denying it would like to add the brand to its empire. But trading in Hermès shares have increased substantially in recent weeks, fuelling talk that a deal was close.

There have been suggestions in the past that LVMH could sell its Moet Hennessy drinks division, which includes champagne brands such as Moet, Krug and Dom Perignon, to Guinness and Smirnoff group Diageo (17p off at 1266p) for €12bn (£10.7bn).

That would help fund a move for Hermès. Diageo already has a 34% stake in Moet Hennessy.

Luxury British label Mulberry jumped 53p to 1343p ahead of next Thursday's results. The shares have risen an incredible 520% over the past 12 months.

Investor demand of late has been stimulated by Prada, the Italian fashion house famous for its handbags, which wants to raise up to £1.58bn by floating 16.5% of the company on the Hong Kong stock exchange.

Unsettled by Federal Reserve chairman Ben Bernanke's assumption that the US economy had suffered a 'loss of momentum' and credit rating agency Moody's warning that Britain is at risk of losing its prized triple-A rating if growth remains weak and the Government fails to meet its debt-cutting target, the Footsie fell 55.76 points to 5808.89.

Wall Street closed 21.87 points in the red at 12,048.90.

In a dull mining sector, Antofagasta led the retreat at 1226p, down 64p. The Chilean miner said at its AGM the ramp-up of its Esperanza copper mine would be completed in the second half of the year, after taking longer than initially planned.

Kazakhmys shed 42p to 1229p and Vedanta Resources 54p to 2026p. African Barrick Gold remained friendless at 415p, down 35p.

Superdry fashion retailer Supergroup rallied 26.5p to 1006p despite a Collins Stewart sell recommendation and target price of 825p.

The broker reckons that if Supergroup manages to achieve its growth targets then the shares look cheap, but the current rating sets expectations high. It is appropriate to be cautious.

ASOS leapt 57p to 2374p after Goldman Sachs raised its target price to £35 from £29. The US broker reiterated its conviction buy on the stock, saying China offers a significant medium-term growth opportunity for the online retailer.

Prada has said it expects Asia to be its fastest-growing region and China to be its fastest-growing market.

Rumours of a 450p-a-share bid from across the pond for Misys refuse to lie down and shares of the computer services group were chased up to 398.4p before closing 9.2p better at 388p.

Car dealer Lookers revved up 6p to 70p ahead of after-hours confirmation that a consortium led by Jack Petchey's investment company Trefick, which already owns 17%, and including Sir Philip Green's stepson Brett Palos and property company Moor Park, has tabled a cash offer worth 80p a share. Punters had been hoping for a bid in the region of 90p a share.

News of new contract wins with BHP and Kinross and a Canaccord Genuity buy recommendation helped mining and drilling company Capital Drilling close 4.75p higher at 99.5p. It was listed on the main market at 60p about 12 months ago.

More than 36m shares in Expansys, 0.125p dearer at 1.5p, changed hands after a seller was cleared. It follows an upbeat trading statement from the retailer of consumer wireless technology of which Dragons' Den entrepreneur Peter Jones owns 41.6%.

Recruitment company Servoca firmed 0.25p to 8.25p following in-line interim results.