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Wednesday, July 30, 2014

Kering Acquires Ulysse Nardin, Pays 13 Times Earnings For High Watch Brand

Ulysse Nardin Marine Diver

Kering makes another jewelry and watch acquisition. This time the French multinational company said Wednesday it will acquire a 100 percent stake in the Swiss luxury watch brand Ulysse Nardin. The watchmaker will join Kering’s recently formed “Luxury – Watches and Jewellery” division headed by Albert Bensoussan. Kering added that the Ulysse Nardin management team, led by Chai Schnyder, president of the Board of Directors, and CEO Patrik P. Hoffmann, will remain in place.

Kering (formerly known as PPR) hasn’t been shy about upping its stakes in the “hard luxuries” category (jewelry and watches). François-Henri Pinault, Kering’s chairman and CEO, said that in a statement that Ulysse Nardin, as one of the last remaining independent haute horlogerie brands, will reinforce its growing jewelry watch division, which consists of Boucheron, Dodo, Girard-Perregaux, JeanRichard, Pomellato and Qeelin. Three brands (Italian jewelers Pomellato and Dodo; and Hong Kong jeweler Qeelinwere acquired by Kering within the past two years. Those acquisitions along with Ulysse Nardin are evidence of the company’s pursuit of luxury jewelry and watch companies. Kering also owns brands in the high fashion, lifestyle and sports merchandising categories.

In addition, both companies say the acquisition will allow Ulysse Nardin to expand more rapidly in Asia. Expansion in Asia is something else Kering has been open about in recent years. 

“Ulysse Nardin benefits from a rich heritage, high profitability and solid growth prospects,” Pinault said. “Independent high-end watchmaking manufactures are rare. This is an opportunity that we had to seize, particularly because this structural acquisition will enable us to take advantage of numerous synergies with our existing brands. We have great ambitions for this company and we will help it continue its international expansion whilst staying faithful to its roots and its identity.” 

The company declined to give an acquisition price but during a conference call Wednesday, Jean-Marc Duplaix, Kering CFO and Jean-Francois Palus, Kering managing director, said the company paid 13 times Ulysse Nardin’s 2013 earnings before interest, taxes, depreciation and amortization. Palus said it is a “fair (price) for a brand with such a rich heritage high visibility and growth prospects.”

As a private company, Ulysse Nardin doesn’t disclose much of its finances or manufacturing volume and Kering wouldn’t release those details. An analyst at the conference call asked if media estimates of annual sales of 250 million Swiss francs and annual turnover of 27,000 pieces per year were accurate. Duplaix responded by saying the “assumption you mentioned is quite sensible and so is the volume of watches the brand is selling per year.” He added that Ulysse Nardin “will become the backbone of our watch business.”

Ulysse Nardin, based in Le Locle, Switzerland, specializes in creating ultra-complicated timepieces, many of them considered groundbreaking achievements, using cutting-edge technologies and state-of-the-art materials. For example, it was one of the first companies to use silicon in its timepiece movements and is one of the few Swiss watchmakers to have its own production capacity for critical watch components, particularly regulating systems.

The independent company was founded in 1846 by Ulysse Nardin with its roots in the nautical world for navigational purposes. It was taken over and re-launched in 1983 by Rolf W. Schnyder who transformed it into a highly profitable business. After his unexpected and sudden death in 2011, Chai Schnyder, Rolf Schnyder's wife, and Hoffmann took over the lead of the company. 

The company still benefits from a very strong brand identity based on its historical expertise in marine chronometers.

“Joining Kering is an opportunity for Ulysse Nardin,” Chai Schnyder said. “It will allow the brand to carry on with its international expansion and continue to innovate, while assuring the long-term future of its knowledge and expertise and communiqué.”

Please join me on the Jewelry News Network Facebook Page, on Twitter @JewelryNewsNet and on the Forbes website.

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