The Swatch Group agreed on Monday to acquire the watch and jewelery business of Harry Winston, which plans to shift its focus to its diamond mining activities.
Swatch, the world’s largest watch maker, will pay $750 million in cash for Harry Winston. It will also assume about $250 million of debt. The Harry Winston Diamond Corporation will be renamed Dominion Diamond after the takeover.
For Swatch, the takeover adds a prominent brand regularly worn by Hollywood actresses to its already vast portfolio. Swatch owns not only its colorful plastic Swatch watches but also upscale names Blancpain and Omega. Swatch also controls the bulk of the sector’s watch movement production after buying several makers of components.
Swatch is paying about 23 times the estimated earnings before interest, tax, depreciation and amortization of Harry Winston, said René Weber, a watch analyst at Bank Vontobel in Zurich, who welcomed the takeover. He said that price was high but justified, considering that Swatch has ample cash reserves. The purchase of Harry Winston also comes after Swatch ended in 2011 a partnership with Tiffany, another luxury jeweler.
“It is a great fit,” Mr. Weber said, adding a strong jewelery brand which “fills the gap in the portfolio” of Swatch. Swatch shares were up 4 percent in midday trading on the Swiss stock exchange.
Swatch is a listed company, but its management and about a third of its equity remain in the hands of the family of Nicolas Hayek, who founded the company and helped revive the whole Swiss watch industry in the 1980s, in the face of stiff Japanese competition, by starting the inexpensive and highly successful Swatch plastic watch. Mr. Hayek died in 2010.
Nayla Hayek, his daughter and chairwoman of the company, said in a statement on Monday that the takeover of Harry Winston “brilliantly complements the prestige segment” of her company. “Diamonds are still a girl’s best friend,” she added, in reference to a song that mentioned Harry Winston and was made famous by Marilyn Monroe in the movie “Gentlemen Prefer Blondes.”
Robert Gannicott, chairman and chief executive of the Harry Winston Diamond Corporation, said that the sale “will leave us well equipped to realize upstream opportunities in an environment where cash has become a strategic resource while preserving and expanding our relationship with the downstream diamond business.” Last November, the company acquired another diamond mine in Canada, called Ekati, from BHP Billiton.
DealBook: Swatch to Buy Watch and Jewelry Business of Harry Winston
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DealBook: Swatch to Buy Watch and Jewelry Business of Harry Winston
