Swatch acquires luxury brand

With its acquisition of Harry Winston, Swatch has added a global brand to its portfolio Keystone

The world’s biggest watchmaker, Swatch Group, has announced the takeover of Canadian-owned watch and jewellery brand Harry Winston and its 535 employees for $750 million (SFr686 million) in a move to boost its high-end portfolio.

“Harry Winston does brilliantly complement the prestige segment of the Group. We are proud and happy to welcome Harry Winston to the Swatch Group family – diamonds are still a girl’s best friend,” Chairwoman Nayla Hayek said in a statement.

The move comes as watchmakers compete to snap up watchmaking know-how and production facilities, and is Swatch Group’s first big takeover in years.

Consolidation has picked up in the luxury goods industry as strong Asian demand for pricey items boosts earnings in the sector, giving companies the firepower to expand their portfolios.

The world’s biggest luxury goods group LVMH bagged Italian jewellery maker Bulgari for $5.2 billion in 2011 and took a stake in Hermes in 2010. Rival Richemont acquired online retailer Net-a-Porter in 2010.

Swatch Group is already the biggest watchmaker by sales, including brands such as Omega, and the acquisition of the prestigious diamond jewellery maker allows it to enter high-end jewellery, a market dominated by Richemont with its flagship brand Cartier.

Watch and jewellery sales, Swatch’s largest business, increased 16 per cent to SFr7.3 billion in 2012, boosting the group’s total sales to a record SFr8.1 billion. It benefited largely from demand in Asia and from tourists who bought timepieces from Swatch brands like Longines and Tissot in Europe.

Traders said on Monday that Swatch had enough money to push through with the deal, adding that it would help boost the group’s activities in the luxury watch and jewellery segments.

“From a strategic perspective it is positive – Swatch Group has long said it wanted to expand in jewellery,” Kepler Capital Markets analyst Jon Cox said. “Details are sketchy but it might also give it a long-term deal on supply of diamonds, something the company has also looked for.

“At first glance it does not look cheap, but that is probably more a reflection of the profitability of Harry Winston at this stage, which is in ramp-up stage in terms of expansion,” Cox added.

No recent purchases

Swatch, which already owns high-end brands Breguet, Blancpain and Jaquet Droz, acquired several component makers over the last years, but its last purchase of a watch brand was more than a decade ago.

Its last acquisitions in the sector were high-end brands Glashuette Original and Jaquet Droz in 2000.

The purchase includes production facilities in Geneva, plus up to $250 million of net debt. Swatch Group said the transaction did not include the mining activities of Harry Winston Diamond Corp, which will change its name to change its name to Dominion Diamond Corporation.

“The Harry Winston brand now has a new home that can provide the skills and support that it deserves to realize its true potential,” said Robert A. Gannicott, chairman of the board and chief executive of Harry Winston Diamond Corp.

The transaction is subject to the approval of regulatory authorities.

Harry Winston’s luxury division’s sales were worth $411.9 million in 2011. It has a worldwide network of stores, and clients include Queen Elizabeth II and Hollywood stars.

Harry Winston, which started as a small jeweler in New York in 1924, was made famous by a reference in Marilyn Monroe’s song “Diamonds Are a Girl’s Best Friend” in the film “Gentlemen Prefer Blondes”.

Every year the firm lends out hundreds of millions of dollars worth of jewels to be worn by movie starts on the red carpet at events like the Oscars.

The company describes itself as the inventor of modern couture jewelry. Its founder notably donated the famous Hope Diamond to the Smithsonian Institution in Washington in 1958.