The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

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.

Several analysts had already flagged Richemont's position, so it seemed likely that the market would react to the share overhang and the price would probably converge until the situation was resolved. This meant that Richemont would miss out on any upside above 675p per share and this effectively reduced the value of its stake.

One possibility was for Richemont to sell a call option on the 5% and earn a premium on that.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree