Johann Rupert, the luxury boss who saw off the hedge fund in a fighting mood

Johann Rupert, the luxury boss who saw off the hedge fund in a fighting mood

The atmosphere at Richemont’s annual meeting in Geneva on Wednesday was tense as billionaire Johann Rupert presided over a key shareholder vote. Activist hedge fund Bluebell accused him of acting as a “padre-padrone”, a godfather-like figure, and tabled resolutions to shake up power at the Swiss luxury group.

“I hope this meeting does not turn into a football match,” said the 72-year-old Richemont chair after a heated exchange with a Bluebell representative.

It was an astute observation that lightened the mood and offered insight into the character of the South African tycoon, described by one friend as “resourceful and fat… . . street fighter”. People who know him well say that while he can seem gruff, he appreciates politeness.

“Johann is very direct and very loyal,” said Patrick Thomas, the former chief executive of luxury group Hermès who joined Richemont’s board last year. “He won’t deal with people he doesn’t trust.”

Thomas added: “He may come across as a bit harsh, but he’s actually very subtle and has strong human convictions.”

The investor said: “You see this bullish, bombastic old-style chair, but there’s another side to it. . . direct and honorable.”

The Bluebell episode started Rupert and his family company in the spotlight at a time when they too are grappling with succession issues and a looming downturn in the global economy that could dampen demand for Richemont brands such as Cartier and Van Cleef & Arpels. Richemont’s shares have lagged those of rivals Hermès, LVMH and Kering over the past five years.

In the end, Rupert easily saw off the challenge by Bluebell.

Shareholders overwhelmingly rejected his three board reconfiguration resolutions, a sign they still trusted Rupert to lead despite hedge fund criticism that he was using a dual-class structure to ignore minority shareholders. His family holding company only owns a 9.1 percent stake, but its B shares hold 50 percent of the voting rights.

Namely, shareholders rejected Bluebell’s nomination of former Bulgari CEO Francesco Trapani as a director. Richemont argued that he was too closely associated with LVMH.

Richemont’s management structure is the legacy of decisions Rupert, a college dropout and sports fanatic who started in finance, made in the 1980s when he set up headquarters in Switzerland and listed its shares.

This move allowed the Rupert family to diversify beyond apartheid South Africa where Anton Rupert, Johann’s father, built a business empire from a £10 investment in cigarette manufacturing in the 1940s. As a child of the Depression, the elder Rupert realized that people would continue to buy tobacco and alcohol during any crisis, and eventually amassed investments in industry, banking and luxury that later became the Rembrandt Group.

Richemont was founded when Rupert Jr. spun off Rembrandt’s international assets in 1988.

Rupert’s upbringing and family history instilled in him a caution that manifests itself in a Richemont-like balance sheet. Dubbed “Rupert the Bear” in 2006 for predicting the global economic crisis, the South African is seen as more risk-averse than rival patriarch Bernard Arnault. The French billionaire has used shrewd acquisitions to build LVMH into the world’s largest luxury group, with a market capitalization five times that of Richemont.

In contrast, Rupert has done fewer big deals, preferring to invest in expanding the brands Richemont already has. One of its biggest bets has proved destructive to value – the group last month booked 2.7 billion euros in cash after selling a majority stake in its unprofitable e-tailer Yoox Net-a-Porter.

Rupert has developed a global network of billionaires, financiers and sports stars that he looks to for insight and advice. “He’s the only person I’ve met who listens all the time while talking,” the investor said. “He talks, dominates and accepts everything.”

He and his wife Gaynor have three children, one of whom is on Richemont’s board, and divides his time between London, Geneva and the family farm in the Stellenbosch wine region.

He never lost touch with his roots in South Africa. “The family were great critics of apartheid, especially Johann,” recalled Lord Robin Renwick, a former Richemont board member. “There weren’t many other senior businessmen at the time who were willing to stand up and criticize apartheid.”

Renwick, who was a British diplomat at the time, said Rupert helped campaign to get Nelson Mandela out of prison. After his release, the pair became friends, Renwick added.

“In South Africa, Johann is like a Warren Buffett figure,” celebrated for his philanthropy, conservation and job creation, Renwick said. He is also the favorite bogeyman of South Africa’s populist Economic Freedom Fighters party.

The feud with a small activist fund is a small pledge for a man who clashed with former South African President Jacob Zuma. “I hate what he’s allowed to happen to the country, but I don’t hate him,” Rupert said in 2018.

Looking ahead, it faces far greater challenges than Bluebell. An economic slowdown risks hurting luxury demand. LVMH’s Arnault has long coveted Cartier, and Richemont rejected Kering’s unspecified tie-up approach a few years ago because Rupert insisted it had no intention of selling.

Eventually, he will have to hand over the reins to a new leader, while also trying to preserve Richemont’s independence. The company said it has a succession plan, but did not share it. The investor says it bluntly: “There is a succession problem.”



Source link

Leave a Reply