LONDON – Richemont chairman Johann Rupert has fulfilled a promise made to shareholders in May and drawn up a loyalty scheme to thank them for sticking with the company during the COVID-19 crisis, and beyond.
On Friday, Cartier’s parent said it plans to issue warrants to shareholders, allowing them either to trade the security, or to acquire new Richemont A shares in three years at a potentially beneficial exercise price.
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It’s a means of keeping shareholders content after Richemont said in May it was downsizing its dividend for fiscal 2019-20 to 1 Swiss franc per 1A share/10B shares.
At the time, Rupert said he’d wanted to give shareholders a warrant or “loyalty bonus” to acquire future shares on advantageous terms. He said Richemont was still ironing out all the details, but the aim was for shareholders to be “richly rewarded” once better times return.
The company said Friday that the warrants’ exercise price will be set on the basis of the volume-weighted average market price of the Richemont A shares before the 2020 Annual General Meeting, which is set for Sept. 9.
The company said it wants to allow shareholders who hold the warrants until maturity “to benefit from any potential upside in the market price of the Richemont A shares” during the lifetime of the warrants.
In connection with the issuance of the warrants, shareholders will be asked at the 2020 AGM to approve the creation of conditional capital, and to authorize the issuance of a corresponding number of new shares upon exercise of the warrants. This year, the AGM in Geneva will take place behind closed doors due to social distancing requirements.
“We are currently facing an unprecedented global health crisis. Predicting the likely scope and timing of a recovery in demand remains difficult, if not impossible,” Rupert said Friday.
“A surge in COVID-19 cases has forced countries to reverse re-openings and to reimpose restrictions. Therefore, amid the unprecedented effects of the COVID-19 pandemic and the uncertainty surrounding broader economic conditions, the board of directors has decided that it is appropriate to retain an extra liquidity buffer with a reduced dividend level, while awarding shareholders a supplementary benefit that will allow them to capture any ultimate improvement in global conditions.”
Rupert added that, due to the prevailing uncertainty, Richemont has decided to set the maturity of the warrants at three years in order to capture the potential future upside in the market price of Richemont shares once all the challenges of the COVID-19 pandemic “will have hopefully been overcome.”
In May, during a call to discuss Richemont’s 2019-20 results, Rupert said Richemont has enough liquidity to last 36 months, a net cash position of 2.4 billion euros, and an increasingly flexible, digitally led business model.
“We are lucky in that we prepared for an economic downturn,” Rupert said at the time. “COVID-19 merely sped up what was probably going to happen in any case: Economic reality settling in. A few years ago, we acted decisively in cleaning up our watch market, and we’ve always been very careful with our cash and liquidity.”
On Friday, Richemont also announced the nomination of Wendy Luhabe for election to the board of directors. She will serve as a non-executive director and become a member of the board’s Nominations Committee.
Luhabe has a long relationship with Richemont, chairing Vendôme South Africa, Richemont’s subsidiary in the region, from 2001 to 2011.
Richemont described her as a social entrepreneur and economic activist “with multiple honors for her pioneering contribution to the economic empowerment of women in South Africa.”
She is the founding chair of Women in Infrastructure Development and Energy, which focuses on the economic empowerment of women, and of Bridging the Gap, an organization that equips black graduates with corporate skills.
She founded the Women Private Equity Fund, South Africa’s first private venture capital fund for women, and helped to start Women Investment Portfolio Holdings, which empowers women to become investors in the South African economy.
She has more than 25 years of board experience across companies including Tiger Brands, Vodacom, the Johannesburg Stock Exchange, the International Marketing Council, Alliance Capital, and the IMD and ESSEC business schools.
She also created the Wendy Luhabe Foundation and established a scholarship at the University of Johannesburg. She holds a degree in commerce from the University of Lesotho and an Honorary Doctorate from the University of Fort Hare.