The business paper Kommersant said the maker of Hennessy cognac and perfumes such as Dior has paid the first installment for the stake, and the deal will be completed by the end of the year.
Under the contract, the paper said, Edinaya Evropa, which owns the Ile de Beaute cosmetics and perfume chain, will also replace L'Etoile as franchiser of LVMH's Sephora perfume and cosmetics brand in Russia.
A source in the Paris-based holding has confirmed talks on the deal, the paper said, adding that Ile de Beaute owner Igor Denisov has declined to comment.
Founded in 1992, Edinaya Evropa runs 103 cosmetics stores across Russia. Its earnings in 2007 stood at about $280 million. It was Russia's third largest distributor after L'Etoile/Sephora, with annual earnings of $760 million, and Arbat Prestige ($530 million) in 2007.
Ile de Beaute has gained more of the market since the Arbat Prestige owner was arrested on tax evasion charges in late January, and the cosmetics retailer faced about $39 million in debt claims. The firm now accounts for about 20% of the market, according to Kommersant.
Analysts cited by the paper said Ile de Beaute could be worth $167-$250 million. Kommersant also said, referring to its sources, that the contract with LVMH allows the Ile de Beaute owners, Denisov and Andrei Gribkov, to open Sephora stores in Russia.
Sephora cosmetic brand's franchiser in Russia is Alcor, also the operator of L'Etoile stores. Earlier reports said Moet Hennessy Louis Vuitton was unhappy with L'Etual's policy toward the Sephora brand.
LVMH produces wines and spirits, including top champagne brands like Dom Perignon and Ruinart, fashion and leather goods, perfumes and cosmetics like Dior, Givenchy, Kenzo, and watches. The holding's profit in the first six months of 2008 stood at 7.8 billion euros ($11.3 billion).
The holding has been present on the Russian market since 2006, when it bought Seldico, a major cosmetics retailer. LVMH Perfumes & Cosmetics Russia (Seldico LLC) supplies Christian Dior, Givenchy, Guerlain, Kenzo, Fendi, Emilio Pucci scents to the country and is one of the leaders in the market segment.
