The activist hedge fund, Third Point, has taken a stake in Richemont. Richemont is a Geneva-based luxury goods group and owns watch brands such as A. Lange & Söhne, Cartier, IWC Schaffhausen, Jaeger-LeCoultre, Officine Panerai & Vacheron Constantin. Third Point is a hedge fund led by Dan Loeb and it has been responsible for spearheading significant change at Nestlé, Sony, Yahoo, and Sotheby’s in the past. More recently Dan Loeb has been making headlines pushing for a breakup of behemoth Royal Dutch Shell.
Activist Hedge Funds do not buy shares to simply hold on to them for better or worse. They tend to buy a (significant) stake, to then actively force change in order to increase the value of their holdings. They tend to do this by driving change from the inside, by for example obtaining seats on the board of directors, pressing for significant strategy changes, and changing a group’s financial structure. Suffice to say that the revelation that an Activist Investor has moved in at Richemont is big news in Geneva.
Richemont has a very rich portfolio of brands and has had a good run this past year as well. However, its performance compared to its peer LVMH shows room for significant improvement. One look at the chart below shows that LVMH, under the leadership of Bernard Arnault, has managed to outperform Richemont by a large margin.
It is still unknown how large the stake is, so surely there will be more news to follow in the coming weeks and months as more details are revealed. For more information, check out the breaking story right here at Miss Tweed.
Pretty crazy news, hopefully for the better, but I have my doubts, cost cutting/getting leaner usually means more corners cut for more profit, less discounts, etc, etc.