LVMH Moet Hennessy Louis Vuitton SE to Acquire Christian Dior Couture Brand from Christian Dior SE and to Simplify Group Structures Conference Call
Apr 25, 2017 AM CEST
MC.PA - LVMH Moet Hennessy Louis Vuitton SE
LVMH Moet Hennessy Louis Vuitton SE to Acquire Christian Dior Couture Brand from Christian Dior SE and to Simplify Group Structures Conference Call
Apr 25, 2017 / 10:00AM GMT
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Corporate Participants
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* Chris Hollis
* Florian Ollivier
Christian Dior SE - CFO
* Jean-Jacques Guiony
LVMH Moet Hennessy - Louis Vuitton SE - CFO
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Conference Call Participants
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* Antoine Belge
HSBC, Research Division - Global of Consumer and Retail Research
* Claire Poncet Dumont
* Hermine de Bentzmann
Raymond James Euro Equities - Research Analyst
* John Guy
MainFirst Bank AG, Research Division - Senior Analyst
* Julian Easthope
Barclays PLC, Research Division - MD
* Leopold Authie
Oddo Securities, Research Division - Research Analyst
* Mario Ortelli
Sanford C. Bernstein & Co., LLC., Research Division - Senior Research Analyst
* Oliver Gleeson
* Thomas Vincent Chauvet
Citigroup Inc, Research Division - Head of European Luxury Goods Equity Research and Director
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Presentation
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Operator [1]
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Welcome to the Christian Dior and LVMH Conference Call. I will now hand over to Mr. Chris Hollis. Sir, please go ahead.
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Chris Hollis, [2]
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Hello, and welcome. I am Chris Hollis, Director of Financial Communications at LVMH. And with me today are Florian Ollivier, the CFO of Christian Dior, and Jean-Jacques Guiony, the CFO of LVMH. Thank you for joining us.
We have some brief remarks to make about the project that we announced in Paris this morning. And after these remarks, Florian, Jean-Jacques and I will be able to take your questions.
But before I begin, I must remind you that certain information to be discussed on today's call is forward-looking and subject to important risks and uncertainties that could actually cause actual results to differ materially. For these, I refer you to the safe harbor statement included in our press release. I'd also refer you to the notice at the top of both the press release and the presentation stating that these documents are not for publication or release, directly or indirectly, in the U.S., Australia, Canada, Japan or South Africa.
Turning now to this morning's announcement. Hopefully, you've all had the time to read through the press release issued in both French and English and available on our website, along with the presentation which we'll be using as a guide for our introductory remarks.
The project we announced aims to simplify the Christian Dior, LVMH group structures and strengthen LVMH's Fashion & Leather Goods division through an offer by the Arnault Family Group on the Christian Dior shares that they do not hold and the acquisition of Christian Dior Couture by LVMH.
In summary, this is on Slide 2 of the presentation, you can see the project is made up of 2 transactions, in the middle, supporting 3 strategic aims around the side. Firstly, the acquisition by LVMH of Christian Dior Couture, one of the world's most iconic and prestigious brands, would strengthen the Fashion & Leather Goods business group of LVMH. And secondly, the simplification of the group's structure, long demanded by the market, such that the Arnault Family Group would have a strengthened position in Christian Dior, whose assets, after the transactions, would be its 41% stake in LVMH, where all the operational assets of the group would be held. And finally, the Arnault Family Group would reinforce its commitment as a family shareholder.
You can see a summary of these contemplated transactions on Slide 3. Firstly, there would be a public offer by the Arnault Family Group on the Christian Dior shares that it does not own. This offer would take the form of a primary mixed offer of cash and Hermes shares, with the majority in cash. The main offer consists of EUR 172 in cash and 0.192 Hermes shares for each Christian Dior share, representing a 14.7% premium on the last closing price -- share price of Christian Dior, and a 18.6% premium over the 1-month volume-weighted average price. The main offer is complemented by 2 secondary offers, for cash only or Hermes only -- Hermes shares only, with certain overall limits, which Florian will address later.
Secondly, the acquisition of Christian Dior Couture by LVMH at a price that reflects an enterprise value of EUR 6.5 billion or a multiple of 15.6x EBITDA, that's earnings before interest, tax, depreciation and amortization, and about which Jean-Jacques will speak later. The Boards of Directors of Christian Dior and LVMH are unanimously favorable to the respective transactions that concern them.
In the diagrams on Slide 4, you can see how the group structure changes as a result of these operations. Essentially, Christian Dior Couture leaves Christian Dior and is integrated within the LVMH structure. And the Arnault Family Group increases its control over Christian Dior up to 100%, depending on the results of the offer.
So the key highlights of the project are: For Christian Dior shareholders, the opportunity to sell their shares at an almost 19% premium over its average 1-month share price. And for LVMH shareholders, the contemplated transactions present several advantages: the strengthening of LVMH's Fashion & Leather Goods division through the acquisition of one of the most iconic and prestigious brands in the world whose growth prospects remain strong, an accretive impact on earnings per share from the first year, a simplification of the group structures that I mentioned earlier and a greater commitment from the family shareholder.
Now let me hand over the call to Florian Ollivier, the CFO of Christian Dior, who will present the public tender offer by the Arnault Family Group on Christian Dior shares, after which Jean-Jacques Guiony, the LVMH CFO, will present the details of the acquisition of Christian Dior Couture by LVMH. Florian?
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Florian Ollivier, Christian Dior SE - CFO [3]
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Thank you, Chris. Let me now go over the technical details of the planned tender offer. Let's go on Page 7 of the presentation.
The tender offer will be initiated by Semyrhamis. Semyrhamis is a company which is part of the Arnault Family Group. The offer targets all publicly held shares, which is about 25.7% of the share capital of the company. Taking into account the premium, the offer's total value will represent EUR 12 billion.
The main offer is a mixed offer. In other words, it proposes to pay tendered shares in both cash and Hermes International shares, precisely EUR 172 in cash and 0.192 Hermes share per Christian Dior share. The Hermes shares which will be exchanged are currently held by the Arnault Family Group.
In addition to this main offer, there will be 2 secondary offers as part of the mix-and-match option, one which would be cash-only and the second one, which will be Hermes shares only, precisely 0.566 Hermes share per Christian Dior share. These secondary offers will provide the Christian Dior shareholders with a higher degree of flexibility. It will give them the possibility to opt for either more cash or more Hermes shares within the overall limit of approximately 2/3 of the value in cash and 1/3 in Hermes shares, based on the share price of Hermes end of yesterday. The reduction mechanism will, therefore, be put in place to ensure that such overall proportion is respected.
In practical terms, that means that the final cash and share allocation of each shareholder will result from both the election that he may make as far as the secondary offers but also from the elections of other shareholders.
Total consideration offered as part of this tender offer is equivalent to EUR 260, based on the Hermes closing share price as of April 24, yesterday. Share price adjusted for the planned detachment of the balance of the year 2016 dividend. This value represents a 14.7% premium over Christian Dior's share's last trading price, an 18.6% premium over its 1-month VWAP and a 25.9% premium over its 3-month VWAP.
It should be noted that the Arnault Family Group does not intend to implement a squeeze-out at the offer's close and the offer is conditioned upon the conclusion of the financing under satisfactory terms by Semyrhamis, the initiator of the offer, and satisfactory completion of the regulatory process with the French Financial Markets Authority, AMF.
Based on this, the filing of the offer should take place in late May 2017 once the 2 aforementioned conditions are met.
Let's now move on Page 8 of the presentation.
As we indicated before, the offer is based on the net asset value of Christian Dior. This chart highlights the details of the estimated net asset value for Christian Dior. Let's stress that Christian Dior is a pure holding company with 2 main assets: the 41% stake in LVMH and the 100% stake in Christian Dior Couture.
On the left-hand side of the chart, you have the value of the 41% stake in LVMH. Based on the 3-month VWAP, EUR 40.4 billion; and based on the 1-month VWAP, EUR 42.7 billion. To this we add the value of Christian Dior Couture; the enterprise value is EUR 6.5 billion. This enterprise value is the value which has been used for the price which has been set between -- for the sale of Christian Dior Couture between Christian Dior and LVMH.
From the value of these 2 assets, one has to deduct the net financial debt: at the level of Christian Dior, EUR 1.5 billion; and other liabilities, net liabilities of EUR 0.2 billion. That leaves us with a net asset value for the company as a whole ranging from EUR 45.2 billion based on the 3-month VWAP up to EUR 47.2 billion (sic) [ EUR 47.5 billion ] based on the 1-month VWAP. Expressed as euro per share, the NAV of Christian Dior represents a range -- in the range of EUR 251 to EUR 263.
Let's now move on Page 9 of the presentation, which is an illustration of the terms of the offer. On the left-hand side, you have the offer price of EUR 260, which is made of the cash component, EUR 172, and the equivalent value of the 0.192 Hermes shares, EUR 88. And on the middle of the chart, you have the spot price of Christian Dior as of yesterday night, the 1-month average, 3-month average, 6-month average. And on the right-hand side, you have the NAV per share. What this chart represents is that the EUR 260 offer value is at a significant premium, plus 14.7% over the spot share price, and then premium ranging from 32.8% to 18.6% over the stock average, depending on the duration of the -- over which it was calculated. And as you can see, the EUR 260 value is in the higher part of the range of the net asset value, which is between EUR 251 and EUR 263.
In summary, and I'm now on Page 10, the offer by the Arnault Family Group on the Christian Dior shares constitutes an attractive offer in view of the premiums that I just described, in view of the fact that the price being offered is in line with the company's net asset value. This offer also represents a liquidity opportunity to all Christian Dior shareholders without any limits and at the time when the share is trading at all-time highs.
Thank you. Let me now pass on to Jean-Jacques.
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [4]
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Thank you, Florian. So we will now turn to Page 12 with the key terms of the transaction concerning the acquisition by LVMH of Christian Dior Couture. So let me start by indicating the key terms of this transaction.
As we have indicated, the retail -- the enterprise value amounts to EUR 6.5 billion for -- from which we need to deduct the net financial debt which would be transferred. It's about EUR 0.5 billion. This enterprise value represents a multiple of 15.6x the last 12 months EBITDA, so earnings before interest, taxes, depreciation and amortization, a measure which is most commonly used by the market in a majority of transactions.
Christian Dior has granted us a vendor loan, which will allow us to choose when to refinance this transaction on the market. Obviously, we do not today, as of today, anticipate any particular issues in successfully completing this refinancing, but it's better to have flexibility.
The Board of Directors of Christian Dior -- both Christian Dior and LVMH are unanimously favorable to this transaction, which, I remind you, is only a project at this point in time, since, as it is classical in this situation, it is still subject to an information consultation process with the employee representative bodies of Christian Dior Couture, confirmatory due diligence and the finalization of the legal documentation and the review of key financial terms by independent experts and the vote by the Board of Directors of both Dior and LVMH as they are regulated related-party agreements. As for the public offer, we have quite some work ahead of us and estimate that the transaction will take place early in the second half of this year.
Let's now to turn to Page 12 with a few -- sorry, Page 13 with a few numbers on Christian Dior Couture. Over and above the figures that you can read on this slide, I would like to insist on 2 or 3 points. One is that Christian Dior revenue will be over EUR 2 billion in 2017. You are aware of how difficult it is to get to the EUR 1 billion threshold, and all the more so for the EUR 2 billion in the luxury domain. Few players are in this group. When one also knows the benefit of scale in our business, whether in terms of marketing or distribution, you can see how this transaction represents a very strategic opportunity for LVMH.
Pretty much all the revenues of Christian Dior Couture is generated in its own stores. Without reaching the perfect model of its future big brother, Louis Vuitton, Christian Dior Couture generates a large part of its revenue in retail, which is not only a profitability factor but also a measure of the strength of the brand, which, as everyone knows, is much better expressed through this channel.
Finally, an EBITDA over the last 12 months of around EUR 420 million or over 20% of revenue, what I think is another important and symbolic threshold.
Turning to Page 14. I've already started to express what I think constitutes, in our eyes, the main benefits of Christian Dior Couture for LVMH. I clearly have not insisted on the positioning of Christian Dior Couture in luxury, which, how can I say, is simply incomparable. Christian Dior Couture is one of the most iconic and prestigious brands in luxury. In luxury, only few players make it. And there is -- there are not many newcomers. What can be said about the high end of luxury universe where Christian Dior Couture is positioned? Even fewer brands can claim to play in this area. This unique positioning results from a rich heritage and a complex alchemy, which would be pretentious to try to summarize in a few slides. I will, however, mention a few ones.
Turning to Page 14, starting with the obvious -- sorry, 15. Starting with the obvious, which is the designers. The exceptional designers who have shaped the brand over the decades of its ascent, starting with Mr. Dior, whose name is the world's most well-known French name, who set down some exceptional foundations; followed by others as talented as Yves Saint-Laurent, Marc Bohan, Raf Simons, to mention but a few. Maria Grazia has today the responsibility of following them, and she does it with great talent.
Turning to Page 16, discussing a bit the distribution network, which is nothing else but exceptional. It's totally controlled, and the brand has made some considerable investments over the last few years. In total, Christian Dior Couture has 200 stores, all magnificently located, which, in some ways, is a physical demonstration of the brand's power and a measure of its durability. Under LVMH, Christian Dior Couture has purchased the most strategically located stores and today has a remarkable commercial real estate portfolio.
Getting back to the numbers on Page 17, which for me are, of course, important. Christian Dior Couture, as you can see from this slide, is a strongly growing business. Its revenue base has almost doubled since 2011. And its profit from recurring operations, which, as you know, is our main metric, has been multiplied by 3. Concerning the first quarter of 2017, the growth continues with an organic growth of about 17%, slightly better than the Fashion & Leather division of LVMH. You can also see from the slide the balanced breakdown of revenue, whether by product or geographical zone.
Turning to Page 18. It is, therefore, you have understood, a very strategic acquisition for LVMH and its shareholders. The historic proximity of Christian Dior Couture to LVMH should not lead you to mistake the importance of the transaction for LVMH. We are acquiring an asset that generates EUR 2 billion of revenues, growing with an excellent profitability and in the highest part of the luxury segment. This is a unique opportunity that should be understood as such. In addition, this transaction allows the union of the total brand Christian Dior within LVMH, creating a global brand which revenue ranges from EUR 4 billion to EUR 5 billion, which is quite exceptional, with the effect of simplification for which we have been vigilant but which represent many opportunities to further strengthen the power of the brand.
I will conclude with Slide 19, which describes the impact of the transaction for LVMH. The first indicates the financial impact on our earnings per share. The -- there will be an accretion of the earnings per share of about 3%. The second part of the chart shows the gearing ratio, so net debt to net equity, which obviously increases as 100% of the consideration will be funded through additional debt for LVMH, but which stays at the level of 35%, which is quite favorable. Some other measurement would compare the net debt with EBITDA. We would be slightly above 1 year of EBITDA, which is also considered as being fairly favorable. So a transaction that will not destroy the -- far from that, the excellent financial balance of LVMH.
And I will now turn back to Florian for a last chart on the timetable.
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Florian Ollivier, Christian Dior SE - CFO [5]
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Yes, a quick word about the indicated timetable. We expect the filing of the offer to take place in late May, and we expect to obtain clearance from the AMF, the regulatory body, in June 2017. Once we obtain the clearance, the offer will be immediately launched, and the offer will be standing for 3 weeks.
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Chris Hollis, [6]
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Thank you. Now we can open the call. Benoit, could you open it up for questions, please?
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Questions and Answers
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Operator [1]
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(Operator Instructions) We have a first question from John Guy from MainFirst.
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John Guy, MainFirst Bank AG, Research Division - Senior Analyst [2]
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First question is with regards to any specific tax savings on the collapsing of the structure. The second question is around the cost of debt. I think there's a 24-month vendor loan granted. Could you maybe give us an idea in terms of what the cost of debt is on this? And also, with regards to, I guess, the foreseeable margin uplift in synergies given the strategic optimization on the deal. I've always sort of taken the view that Dior has been a beneficiary of LVMH Group in terms of some of the AMP and the property position that all the property investments in a way that LVMH Group manages its property portfolio, that Dior has always been a beneficiary of that. So could you maybe just talk about how you see future margin, the evolution within Dior, within the LVMH Group, specifically?
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Florian Ollivier, Christian Dior SE - CFO [3]
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Thank you, John. In response to that first question, as far as the deal is concerned, it's not a tax-driven transaction, so there is no specific tax savings associated with it.
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [4]
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And I would say that Christian Dior Couture within LVMH or within Christian Dior will pay the same amount of tax, so no particular impact. On your last question, John, the cost of debt on the vendor's loan is 1%. Let me stress, nevertheless, that it's quite theoretical. It's a flexibility, as I said, that we have so that we can pick the best moment for us to refund -- to fund the transaction on the market. It's not obvious that the vendor's loan will even exist. I mean, maybe we'll be in a position to refinance the transaction before the closing, maybe not. We don't know. Anyway, it's 1%.
As far as your question on the uplift in margins and synergies are concerned, I -- 2 different questions in my view. Uplift in margin is the question of the momentum in Christian Dior Couture's margins as of today, which is very significant. We expect -- a lot has been done, but we expect to do more to improve the margin. The EBITDA margin is quite favorable. The EBIT margin is a bit -- is still a bit low as the cost of capital, so the depreciation and amortization line is a bit high. So we are going out from a heavy period of capital spending, but we expect really the margins to continue to improve in the future.
As far as synergy is concerned, your comment is right. As much as we can, we benefited -- I mean, Dior Couture benefited from the help of LVMH. But as Mr. Arnault said this morning, obviously, not being part of the same legal entity creates some limitations and some constraints that will be lifted by the fact that Christian Dior Couture will now belong to LVMH. So you know that as far as synergy is concerned, we are more talking about doing intelligent things as opposed to be heavy cost cutters, you know that. I mean, it's been the case forever, and obviously, it will not change with the integration of Dior Couture. But there is more to be done once Dior Couture belongs to LVMH rather than that was doable in respecting the -- I would say, the interest of the respective shareholders of both companies before. So there is more to come.
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John Guy, MainFirst Bank AG, Research Division - Senior Analyst [5]
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That's very clear, Jean-Jacques. Maybe just one follow-up on the depreciation. You mentioned, I think, it's about 7% for Christian Dior, so -- on the Couture side, so that's obviously reasonably high. You said that there will be opportunities to bring that down within the LVMH Group.
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [6]
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Well, a lot has been done in terms of capital spending over the recent years and progressively as Christian Dior is no different to LVMH. I mean, the depreciation period for our stores is mostly 6 years. And as time goes by, I mean, the depreciation charge goes down unless there is a big investment program, which won't be the case. I mean, the bulk of what has to be done has already been done. So you can expect this to go down progressively in the future.
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John Guy, MainFirst Bank AG, Research Division - Senior Analyst [7]
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That's very clear. Many thanks to you all.
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Operator [8]
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We have another question from Mr. Thomas Chauvet from Citi.
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Thomas Vincent Chauvet, Citigroup Inc, Research Division - Head of European Luxury Goods Equity Research and Director [9]
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I have 3. The first one on just the rationale -- I remember, Jean-Jacques, you said generally, historically, over the last decade, that the status quo on the LVMH-Dior structure was preferable, maybe things would change at some point in the future. So what has changed over the past few months, over the past year that triggered this transaction? And just aside -- in light of the French political agenda, are you of the view that the deal was going to happen irrespective of the outcome of the first round or the second round of the presidential election?
Secondly, on the integration of Dior Couture within LVMH, can you elaborate on what will be the main operational changes just from maybe merging or integrating Couture and [ Buffer ] activity? And the timing of these changes -- are these significant changes? Obviously, very different activities and distribution channels.
And finally, on M&A, in terms of the big maneuver, the [ gone ] maneuver in the luxury sector. Does this transaction mean that you're effectively completely exiting Hermes, abandoning your past views on Hermes? You're adding an interesting sizable fashion brand to the portfolio, therefore, making perhaps a pause in terms of M&A. The market has been speculating that you might have an interest in watches and jewelry asset. People talked about Tiffany, especially since the departure of Frederic Cumenal and the appointment of Mr. Trapani, whom you know well, at the board of Tiffany.
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [10]
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Okay. Thank you, Thomas. You don't really expect answers, do you? Let me try to give you some hints on the various points. On the status quo, which is preferable to moving, I always said when you asked me this question, which, indeed, I have to admit, a few times already, the decision is within the Arnault family's hands. So what has changed is that they have decided that it would make sense, given the rest of the transactions taking place, to invest EUR 12 million -- EUR 12 billion of their private money into further consolidating their presence into LVMH. So that's a major decision and a major commitment and a major proof of faith and confidence for the future. That's the big difference, in my view.
The election had nothing to do with all that. I don't know what would have happened if the result of the election had been different. This is science fiction or part science fiction as I am concerned, so I will not comment on this.
On the integration of Dior Couture, what type of operational changes will take place. I would say that, as I alluded to before, we are not big believers in heavy synergies. So not a lot will take place. But as I suggested, we will integrate further Christian Dior Couture into all the monitoring of the retail presence of the group. We will make sure that all the media purchases are being done centrally as it is at the case for the rest of LVMH. The funding of Christian Dior Couture will benefit from the favorable condition that LVMH can borrow to. So basically, Christian Dior Couture will be funded by LVMH once the transaction is completed.
Purchases -- nonstrategic purchases will be done in collaboration with LVMH, which is not the case today, et cetera, et cetera. So we'll implement all the synergies that we implement within LVMH with Christian Dior Couture, but don't expect major upheaval and changes within Christian Dior stemming from this.
Finally, your question on M&A and exiting Hermes, I have to say that we exited Hermes already 2 years ago, if you remember. We dividend out -- we dividend-ed out the shares of Hermes to Christian Dior and the other shareholders. And in turn, Christian Dior dividend out the shares of Hermes to their own shareholders. So as far as we are concerned, we meaning LVMH, it's -- Hermes is history, and it's clear that the family, the Arnault family, decided to swap their financial investment into Hermes for a more strategic investment into LVMH. That's all I can say on this.
As far as all the targets where LVMH are concerned, as I said, you don't really expect me to answer, do you?
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Thomas Vincent Chauvet, Citigroup Inc, Research Division - Head of European Luxury Goods Equity Research and Director [11]
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I don't, Jean-Jacques.
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Operator [12]
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Next question from Mr. Antoine Belge from HSBC.
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Antoine Belge, HSBC, Research Division - Global of Consumer and Retail Research [13]
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It's Antoine at HSBC. Three questions also on my part. First of all, regarding the store network of Christian Dior Couture, roughly 200 units; I think you said most of the CapEx investment had been done. But maybe it strikes me as Dior is still probably having maybe a bit more potential than other brands. So what type of number of store opening could we see in the next 3 years?
Second question is relating maybe to the -- your thinking about share buybacks. I remember, last year, there was a bit of a misunderstanding in the financial community, maybe expecting more than the EUR 300 million you did. Maybe, actually, you had already in mind the deal that is announced today. So if you could maybe refresh the thinking on the returning cash to shareholder with -- after what is happening today. And finally, just a confirmation that the -- after the deal, so the direct -- sorry, the total holding in LVMH from the Arnault Family Group will be pretty much unchanged.
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [14]
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So you had 2 questions. I'm surprised. I mean, you usually have 3. Right, just 2, store opening and the share buyback. Anyone on the -- okay. So on store opening, not much, frankly. We have a plan with not many store openings, but a few of them. The key question for Christian Dior Couture is now to consolidate what they have. They opened a pretty large store, as you've read in the press, not far ago, last week in Tokyo, which is a pretty sizable store. And it's really about developing the business into existing stores much more than opening new ones.
As far as share buyback is concerned, let me remind you what I said consistently over the last year is that we wanted to end up the year with an amount of debt which was consistent with what it was at the end of the year. We ended the year with EUR 3.2 billion in debt, where you should add EUR 650 million for the acquisition of Rimowa and EUR 200 million almost for the exercise of the put option from [ PG ] Loro Piana. So that makes EUR 400 million pro forma by the end of last year, which is exactly the amount of debt that we had at the end of 2015. So our share buyback program was exactly commensurate with our objectives, and obviously, we did not have in mind this -- the deal. And I will hand over to Florian on the family shareholding.
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Florian Ollivier, Christian Dior SE - CFO [15]
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Yes. So Antoine, as far as the interest of the Arnault Family Group in LVMH is concerned, it's -- currently, it represents a little more than 36%. The Arnault Family Group has a direct interest in LVMH of a little bit in excess of 5.5%, plus the indirect interest through Christian Dior, which owns 41% of LVMH. Assuming the tender offer reaches a success of 100%, our economic interest in LVMH will move up. It will move up from around 36% to 46% -- a little more in excess of 46%. So it will be an increase of a little more than 10% in economic interest, depending, of course, on the outcome of the tender offer.
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Antoine Belge, HSBC, Research Division - Global of Consumer and Retail Research [16]
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Maybe a follow-up on that. I mean, in terms of voting rights, any implication from the deal?
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Florian Ollivier, Christian Dior SE - CFO [17]
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Well, as you know, the Arnault Family Group has already more than 50% of the voting rights in LVMH. Very precisely, it's 62%. So it's not going to change anything from this standpoint.
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Operator [18]
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We have another question from Hermine de Bentzmann from Raymond James.
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Hermine de Bentzmann, Raymond James Euro Equities - Research Analyst [19]
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I just have 2 quick questions. The first one is on the EUR 6.5 billion of enterprise value for Dior Couture, can you give us the real estate amount? And the second question is on the dividend policy of LVMH. Do you plan any change in your dividend policy following this simplification of structure?
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [20]
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Thank you, Hermine. No, the dividend policy will be unchanged, which means that we'll keep on focusing on increasing regularly the dividend in a way which is commensurate to the increase in the cash flow and the net profit. So that's the global dividend policy of LVMH, and we don't intend to change it.
As far as EUR 6.5 billion is concerned in the real estate share, it's not -- I mean, the EUR 6.5 million is a transaction value, not a net asset value, so we don't divide it into real estate on the one side and operational value on the other side. The way real estate plays in this value is that as far as some pieces of properties are fully owned by Christian Dior Couture, this enables saving on the rent side. So the saving -- the rent savings is, therefore, multiplied by the capitalization rate, whatever it is, 15x for EBITDA, as I mentioned before. That gives you a value -- sort of a financial value for the real estate.
Usually, the real estate value from a pure property viewpoint is higher than that, but it has not been explicitly taken into account in the valuation of Christian Dior Couture. So the answer to your question is that most of the real estate value of Christian Dior Couture is captured through the savings of rents that enables a higher profit than it would be otherwise.
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Operator [21]
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We have another question from Claire Dumont from CACIB.
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Claire Poncet Dumont, [22]
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I had a quick question regarding Christian Dior bonds. So you have 2 bonds outstanding for Christian Dior. I understand that will be pushed into LVMH, but can you please elaborate on how it is technically possible, please?
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Florian Ollivier, Christian Dior SE - CFO [23]
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No, no, the bonds are not at the level of Christian Dior Couture. They are at the level of Christian Dior. And therefore, there is no change as far as these bonds are concerned.
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Claire Poncet Dumont, [24]
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Yes, but Christian Dior will be like an empty holding now, with no assets anymore.
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Florian Ollivier, Christian Dior SE - CFO [25]
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Not really because the major parts of the assets of Christian Dior will still be there. It's a 41% interest in LVMH.
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Claire Poncet Dumont, [26]
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Okay. So the bonds will remain at the holding level.
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Florian Ollivier, Christian Dior SE - CFO [27]
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Absolutely. And indeed, the -- just as Jean-Jacques is reminding me, I mean, the stake in LVMH is worth in excess of EUR 40 billion. So Christian Dior is...
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [28]
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It's pretty good for an empty company.
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Operator [29]
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We have another question from Mario Ortelli from Bernstein.
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Mario Ortelli, Sanford C. Bernstein & Co., LLC., Research Division - Senior Research Analyst [30]
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The first question is about the real estate at Dior. In Dior holdings, will remain any piece of real estate? Or all the current real estate of Dior holding is under the name of Dior Couture and so will enter in LVMH?
The second question is about possible changing in management of Dior. Now that Dior is a part of LVMH, are you thinking to -- as [it says which], to move some of the managers of Dior into other brands of LVMH and vice versa to try to exploit best practice sharing and other activities on that?
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Florian Ollivier, Christian Dior SE - CFO [31]
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First of all, there was no real estate at the level of the company Christian Dior sees, so there won't be any change from this standpoint. All the real estate related to Christian Dior is part of the overall Christian Dior branch and will move down to LVMH.
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [32]
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And, Mario, your question on agendas in management. Mr. Arnault confirmed this morning that there is nothing contemplated in terms of management changes, so I think Dior has a great management, and it's not anticipated that there will be any meaningful changes there. This being said, over the long term, Christian Dior will be part of the global HR policy of LVMH, and there could be moves in between -- I mean, people from ex LVMH moving into Christian Dior and vice versa. But that's a normal mobility policy that has been spearheaded by the HR division for all the LVMH company, so nothing specific there.
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Operator [33]
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We have another question from Mr. Oliver Gleeson from Investec.
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Oliver Gleeson, [34]
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Just 3 technical questions about the offer. The first one is you mentioned the overall cap of EUR 8 billion of cash and 8.9 million shares. If only a portion of the CDI shareholders accept this offer, does that give them greater flexibility with respect to the secondary offers? Or would those caps of EUR 8 billion and 8.5 million shares also be reduced accordingly?
Second question I had is whether the CDI offer and the Dior Couture offer from LVMH are inter-conditional in any way. Or could either offer go ahead if the other transaction does not proceed?
The third question I had is whether Christian Dior has any plans for the eventual cash proceeds from the Couture sale.
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Florian Ollivier, Christian Dior SE - CFO [35]
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Okay. Thank you very much. The first question relates to the proportion between Hermes shares and cash as far as the secondary offer is concerned. The answer is no, i.e. even if the tender offer doesn't reach the 100% target, we will need to abide by the initial proportion of approximately 2/3, 1/3. So it's not going to change anything.
As far as the conditionality is concerned, as we indicated, the sale of Christian Dior Couture to LVMH is conditioned upon the tender offer receiving the approval from the AMF. And as far as -- third question relates to the cash proceeds from the sale of Christian Dior Couture. Well, first of all, we don't know exactly when the cash proceeds will be received. But once we receive the cash proceeds, then we'll decide what we do with it, depending, of course, on the outcome of the tender offer.
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Operator [36]
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We have another question from [ Samantha Doverfitch ] from [ Dilp Reporter ].
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Unidentified Analyst [37]
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I was just looking for confirmation. Is there any external financing regarding the cash component? And if so, could you give us the names of the banks that you're speaking to at the moment?
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Florian Ollivier, Christian Dior SE - CFO [38]
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Yes. As far as the financing of the transaction is concerned, the timing of the transaction is such that no financing has been secured by the Arnault Family Group at this stage. But given the financial strength and the financial scope of the Arnault Family Group, the Arnault Family Group is very confident about its ability to obtain all the necessary financing or the financing necessary for this transaction.
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Unidentified Analyst [39]
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And that will include external financing, so it's not just existing cash resources being used?
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Florian Ollivier, Christian Dior SE - CFO [40]
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Absolutely. It will include external financing.
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Unidentified Analyst [41]
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Okay. So you're already in conversations with banks on that?
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Florian Ollivier, Christian Dior SE - CFO [42]
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Well, we have started discussions with banks because, as I indicated before, we didn't contact banks before the announcement of the project. So it's only starting from now that we'll be talking to banks. But we have received already quite a number of phone calls.
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Operator [43]
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We have another question from [ Ben Wall ] from [ Tivera ].
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Unidentified Analyst [44]
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My question is actually to do with the cash proceeds that were going to be received by Christian Dior and what your plans were, but I believe that question was already asked. Is it correct that there are currently no plans?
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Florian Ollivier, Christian Dior SE - CFO [45]
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This is correct. No decision has been made yet, and the decision will be made once we receive the proceeds. And the decision which will be made will of course be dependent upon the outcome of the tender offer.
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Unidentified Analyst [46]
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Okay. But there is potential for that to be dividend-ed out, no?
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Florian Ollivier, Christian Dior SE - CFO [47]
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It's, indeed, one of the options.
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Operator [48]
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We have another question from Julian Easthope from Barclays.
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Julian Easthope, Barclays PLC, Research Division - MD [49]
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Just -- you said that you would not squeeze the deal if you didn't get a full 100% of the tender offer through. I just wondered why not. Surely -- isn't that in your best interest to have full control over Christian Dior -- or the family to have full control over Christian Dior shares?
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Florian Ollivier, Christian Dior SE - CFO [50]
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Well, let's be very precise. What the Arnault Family Group did say is that it did not intend to launch, to implement a squeeze-out in the period following the close of the transactions, i.e. we are talking about the 3-month period following the transaction. Now as far as the intent of the Arnault Family Group beyond this 3-month period, it's a point which has not been disclosed yet. And I suppose it will be part of the prospectus which will be filed in the course of May.
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Julian Easthope, Barclays PLC, Research Division - MD [51]
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Okay. Thanks for the clarification.
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Operator [52]
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We have another question from Leopold Authie from Oddo.
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Leopold Authie, Oddo Securities, Research Division - Research Analyst [53]
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Just precision, basically. I -- do you have the right at Dior level to only have LVMH shares? Because I would've thought that you were forced to have at least 2 assets there. So just trying to understand if actually you can leave with only 41% of LVMH at Dior.
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Florian Ollivier, Christian Dior SE - CFO [54]
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No, I don't know which rule you are referring to.
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Leopold Authie, Oddo Securities, Research Division - Research Analyst [55]
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Well, it seemed to me that at the beginning when this whole structure was made, you needed to have more than one asset in Christian Dior. But maybe I'm wrong, so I just wanted to...
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [56]
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The logic is to have more than one and -- but there is no particular rule that obliges the company to diversify from its main asset in any way. The shareholder -- if you look at Dior right now, I mean, the shareholding in LVMH is obviously much more valuable than the shareholding in Dior Couture. And by the way, after the transaction, as Florian told you, I mean, there will be 2 assets. One will be the 41% shareholding in LVMH and the other one will be EUR 6.5 billion in cash or a credit note on LVMH as long as it is unpaid.
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Operator [57]
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We have no other question.
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Jean-Jacques Guiony, LVMH Moet Hennessy - Louis Vuitton SE - CFO [58]
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No other question. Okay. Thank you so much for attending this call. Have a good day.
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Florian Ollivier, Christian Dior SE - CFO [59]
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Thank you very much. Bye-bye now.
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Chris Hollis, [60]
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Thank you.
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Operator [61]
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Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.
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