THE BATTLE of the luxury goods giants reached a new intensity yesterday when Gucci, the Italian fashion house, moved to block an attempt by minority shareholder LVMH to gain control.

Gucci has adopted the "poison pill" defence tactic by introducing a staff stock ownership scheme that effectively reduces LVMH's voting power from 34.4 per cent to 26 per cent. It is an unusual ploy by the designer goods group to force LVMH either to launch a full bid for Gucci or withdraw from its affairs. One analyst described the move as "luxury handbags at five paces".

LVMH, the French company run by Bernard Arnault, controls a string of luxury names, such as Louis Vuitton luggage, Moet Hennessy champagne and the Christian Dior fashion brand.

It has been gradually building up a large stake in Gucci. However, even when its stake reached 34.4 per cent it expressed no interest in bidding for the whole company.

As Gucci is quoted in Holland, there are no trigger points after which a shareholder must mount a full bid.

Gucci rejected Mr Arnault's plans to introduce some of his appointments to the Gucci board and to make "commercial proposals." Instead it has created an employee stock ownership plan which will be issued with 37 million new shares, of which 20 million were immediately exercised. The shares will have full voting rights, thereby blocking the LVMH stake. Gucci will also issue more shares if LVMH takes its holding higher.

LVMH responded by saying that it would take the matter to the courts. Gucci was adamant that its actions were "well within the letter and the spirit of corporate law in Holland". A Gucci spokesman added: "We have taken legal advice and we are happy with our position."

Mr Arnault had nominated three additional members for inclusion on the Gucci board but said they would all be "independent of LVMH".

Gucci chairman Domenico De Sole said: "Having the eyes and ears of a competitor on the board would create a serious and unacceptable conflict of interest."

Another Gucci spokesman said this "would be like Coca-Cola having someone on the board of Pepsi".