Diamonds are a girl’s best friend for Swatch
Yesterday’s deal reverses a 2004 acquisition which turned Harry Winston, the group that discovered what became Canada’s Diavik diamond mine — now controlled by Rio Tinto — into a miner and jeweller.
The original mining arm is renamed Dominion Diamond Corporation after the sale of the Harry Winston luxury business, which started as a small jeweller in New York in 1932 and rapidly became a favourite with movie stars.
For Swatch, the deal is evidence of the benefits of strong Asian demand for watches, handbags and other expensive items that has given companies the firepower to expand their portfolio.
Harry Winston — which Marilyn Monroe mentioned in her song “Diamonds are a girl’s best friend” — has the potential to generate more than €824m in sales and €250m net profit in about four to five years, Swatch chief executive Nick Hayek told Reuters.
Swatch Group is already the world’s biggest watchmaker by sales, with 8.1bn francs sales in 2012 thanks to brands such as Omega. Buying Harry Winston allows it to enter high-end jewellery, a market dominated by Richemont with its flagship brand Cartier.
“If watches continue to grow as dynamically as in 2012, 9bn franc sales are within reach in 2013. Now in view of this acquisition, it can of course be even more,” said Hayek.
For the group, which is best known for its colourful Swatch plastic watches, the deal marks a new attempt to get a foothold in expensive jewellery. Its partnership with US jeweller Tiffany ended in 2011 with the companies suing each other.
Swatch Group and Dominion Diamond Corp will continue to work together in a diamond sourcing deal under yesterday’s purchase, which includes Swatch taking on $250m of debt. The two companies will also consider opportunities for a joint diamond polishing venture.
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