A two-year legal battle for ownership of Gucci ended with LVMH Moet Hennessy Louis Vuitton agreeing to let retailer Pinault-Printemps-Redoute (PPR) take control of the Italian fashion house.

Under the settlement terms, PPR, will buy LVMH’s shares for just over $800 million, raising its stake in Gucci to 53.2% from 42%. PPR will offer to buy out other shareholders late and hopes to own about 70% of the style icon when the three-stage deal is completed in 2004.

“This agreement is good news for our shareholders,” Domenico De Sole, President and Chief Executive Officer of Gucci Group N.V., said in a statement. “The litigation is settled and shareholders are guaranteed a minimum value in April 2004 while retaining the full upside potential from our future growth and development. We have also maintained corporate governance procedures that protect the interest of all shareholders both before and after 2004.”

“LVMH’s primary objective has been to obtain a fair solution for all Gucci shareholders. The agreement announced today achieves this objective and responds fully to the interests of LVMH’s own shareholders,” the company said in a statement.

The settlement marked the end of a legal battle between two of France’s richest men: Bernard Arnault of the LVMH luxury empire, and Francois Pinault, a self-made billionaire who built his fortune in retail chains.

The deal followed months of speculation, denied until last week, that the groups were in settlement talks.

In 1999, LVMH was left with a 20% holding in Gucci after the design house brought in PPR to thwart LVMH’s takeover ambitions. PPR paid $3 billion to buy its stake-a move that has generated controversy and litigation ever since.

Under pressure from authorities in the Netherlands, where Gucci is listed, the companies agreed to drop their legal suits.

The deal involves a three-step transaction with PPR paying $806.5 million for Gucci shares held by LVMH at $94 a share. In a second stage, Gucci will distribute a dividend of $7 a share to all Gucci shareholders except PPR before Dec. 15, the groups said.

Finally, PPR will make a public tender offer for all outstanding Gucci shares at $101.5 a share in spring of 2004. If PPR actually buys up all the remaining shares, the deal would be worth $6 billion in total.

However, at a news conference, PPR chairman Serge Weinberg said the company did not plan to buy all the remaining shares, which would give the deal a lower price tag. Weinberg said PPR would prefer to see about 30% of the Italian group’s shares floating freely, the Associated (AP) reported. PPR said it would finance the purchase by issuing $630 million in stock and a convertible bond issue for a similar amount.

The transaction is subject to the approval of U.S. antitrust authorities and a securities watchdog in the Netherlands. Shares of Gucci-which makes everything from perfume to shoes to handbags-are traded in New York and Amsterdam.

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