Richemont indulges in perfect timing

For luxury goods company Richemont, whose brands include watchmakers Jaeger-LeCoultre and Baume&Mercier, raising money was not a priority. It did, though, have a delicate timing problem. It owned 27.7% of British American Tobacco. But it also held just over 120 million convertible preference shares into BAT due to mature in June 2004 with a redemption price of 675p. If, at maturity, the shares were trading below 675p, Richemont would redeem the bonds and receive £820 million in cash. However, if the share price rose and the bonds converted, Richemont would go above the upper holding limit under the UK takeover code and be obliged either to launch a full bid - which it did not want to do - or become a forced seller.