Kyle Bean for Fortune
By Phil Wahba
September 3, 2014

The bitter feud that has pitted two of France’s most storied luxury names against each other for years has finally come to end.

LVMH Moet Hennessy Louis Vuitton, the world’s largest luxury conglomerate with brands ranging from jeweler Bulgari to handbag maker Fendi, agreed on Wednesday to give up most of the controversial 23% stake in Hermès it had quietly built up since 2007 and not buy any new shares in its smaller rival for five years.

The deal, proposed by the Commercial Court of Paris and agreed to late Tuesday by both luxe groups, all but eliminates the prospect of a takeover of the 177 year-old Hermès, famed for its $10,000 Birkin handbags, and one of the few remaining stand-alone French luxury companies.

Under terms of the agreement, LVMH, controlled by French billionaire Bernard Arnault, will distribute all of its of Hermès shares to its shareholders, while LVMH’s largest shareholder, Christian Dior, will in turn distribute the Hermès shares to its own shareholders. Groupe Arnault, the businessman’s family holding company and a major LVMH investor, will still hold around 8.5% of Hermès shares.

In a statement, the companies’ executives expressed “their satisfaction that relations between the two groups, representatives of France’s savoir-faire, have now been restored.”

The deal ends years of legal wrangling between the two. In 2010, LVMH shocked Hermès, and its controlling family, when it disclosed it had built up a 17% in its smaller rival by means of equity swaps rather than buying shares outright, allowing LVMH to do so in stealth mode. LVMH, an acquisitive company which has bought up some 60 brands in the last 20 years, had long maintained it came in peace and had not intention of taking over Hermès, a claim that was met with skepticism by Hermès patriarch Bertrand Puech, furious at having the company’s arch-rival be it top outside investor.

Last year, the French stock market regulator, Autorité des marchés financiers, fined LVMH for failing to properly disclose it was buying a stake in Hermès.

LVMH stands to make a capital gain of around 3 billion euros on its Hermès holdings, Bloomberg reported, citing an unnamed source. The distribution of Hermes shares will be completed by Dec. 20, 2014, the companies said.

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