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Mark Ralston/Agence France-Presse — Getty ImagesAn emerald and diamond necklace designed by Harry Winston in 1956 was recently auctioned by Christie’s.
The Swatch Group agreed Monday to make its largest acquisition to date, taking over the watch and jewelry business of Harry Winston, which plans to shift its focus to its diamond mining activities.
Swatch, the world’s largest maker of watches, said it would pay $750 million in cash for Harry Winston and assume $250 million of debt. The publicly traded Harry Winston Diamond Corporation, based in Toronto, will be renamed Dominion Diamond after the takeover.
For Swatch, the purchase of Harry Winston expands its vast portfolio of watches by adding a prominent jewelry brand immortalized decades ago by Carol Channing on Broadway and Marilyn Monroe in Hollywood. Harry Winston jewels still regularly adorn actresses on the red carpet at awards shows.
Swatch owns not only the brand that makes colorful plastic watches but also upscale names that include Omega, Breguet and Blancpain. Swatch also controls the bulk of the sector’s production of watch movements after buying several makers of components.
Swatch is paying about 23 times 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 the price was high but justified, considering that Swatch has about 2 billion Swiss francs ($2.2 billion) in cash reserves.
The purchase of Harry Winston also comes after the four-year partnership by Swatch and Tiffany, another luxury jeweler, ended acrimoniously in 2011. The other two luxury groups that dominate the watch sector — Richemont and LVMH Moët Hennessy Louis Vuitton — already have a strong presence in jewelry. Richemont owns Cartier while LVMH acquired Bulgari, the Italian jeweler, nearly two years ago.
‘‘It is a great fit,’’ Mr. Weber said of the new purchase, adding a strong jewelry brand that ‘‘fills the gap in the portfolio’’ at Swatch, particularly following the unsuccessful alliance with Tiffany.
Swatch, based in Biel, Switzerland, is listed on the SIX Swiss exchange in Zurich, with its shares rising 4.1 percent to 512.5 Swiss francs on Monday, as investors applauded the deal.
Still, Swatch’s 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 introducing the inexpensive and highly successful Swatch plastic watches. 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, which has 535 employees, ‘‘brilliantly complements the prestige segment’’ of her company.
‘‘Diamonds are still a girl’s best friend,’’ she added, echoing the lyrics from the stage and film versions of ‘‘Gentlemen Prefer Blondes,’’ a song that made Harry Winston a household name.
Robert Gannicott, chairman and chief executive of the Harry Winston Diamond Corporation, said 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.’’
In November, the company acquired the Ekati diamond mine in Canada from BHP Billiton. It has also maintained a 40 percent stake in the Diavik diamond mine, also in Canada, which it has developed with Rio Tinto. Rio Tinto, however, indicated last year that it was likely to divest its diamond assets.
Article source: http://dealbook.nytimes.com/2013/01/14/swatch-to-buy-watch-and-jewelry-business-of-harry-winston-for-750-million/?partner=rss&emc=rss