Swatch Group Finalizes $1 Billion Acquisition of Harry Winston

The Harry Winston Salon in Harrods London department store.

The world-renowned Harry Winston luxury brand is now under new ownership. The Swatch Group Ltd. said late Tuesday that it has successfully completed the acquisition of the jewelry and timepiece retailer.

Swatch and Harry Winston Diamond Corp.,  now the prior owner of the brand, announced in January that the Harry Winston luxury retail division was being sold for $750 million plus the assumption of up to $250 million of pro forma net debt.

In addition to being a luxury jeweler and timepiece company, Harry Winston Diamond Corp. operates as a diamond mining business with a 40 percent ownership interest in the Diavik Diamond Mine. It is finalizing the purchase of the Ekati Diamond Mine, including its diamond sorting and sales facilities. Both mines are in the Northwest Territories of Canada.

Following the transaction, the company now is solely a diamond company and operates under the new name, Dominion Diamond Corp., while Swatch Group retains the Harry Winston brand name.

The U.S.-based luxury retail business was bought by the Canadian diamond mining group, Aber Corp., in 2006 to create the Harry Winston Diamond Corp., with divisions in luxury retail and diamond mining. It was listed on the New York Stock Exchange in 2007.

The brand’s namesake (Harry Winston, March 1, 1896 – December 28, 1978) founded the luxury retail company in 1932. He was among the most famous jewelers in the world and the first jeweler to lend jewels to an actress for the Oscars red carpet in 1944. He was also famous for donating the Hope Diamond to the Smithsonian Institution in Washington.

The luxury diamond jeweler and timepiece retailer has salons in key locations—including New York, Paris, London, Beijing, Shanghai, Hong Kong, Singapore, Tokyo and Beverly Hills.

The Swatch Group, based in Biel, Switzerland, is the world’s leading supplier of finished watches and watch movements and one of the world’s largest buyers of polished diamonds. The two companies previously said that they will explore the opportunities for a joint diamond polishing venture bringing together the manufacturing and diamond expertise of the two companies.

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Harry Winston Diamond Corp. Receives Approval to Sell Luxury Brand to Swatch Group

Harry Winston Diamond Corp. said Thursday that it expects the sale of its luxury diamond jewelry and timepiece division, Harry Winston, Inc., to the Swatch Group to close on or around March 26. The Toronto-based company said it has received regulatory approval to complete the sale.

The two companies announced in January that the Harry Winston luxury division was being sold to the Swatch Group for $750 million plus the assumption of up to $250 million of pro forma net debt.

In addition to being a luxury jeweler and timepiece company, Harry Winston Diamond Corp. operates as a diamond company with a 40 percent ownership interest in the Diavik Diamond Mine. It is finalizing the purchase of the Ekati Diamond Mine, including its diamond sorting and sales facilities. Both mines are in the Northwest Territories of Canada.

Upon completing the sale of its luxury retail business, the company will be solely in the diamond mining and distribution business operating under the new name, Dominion Diamond Corp. The Swatch Group will retain the Harry Winston brand name.

The U.S.-based luxury retail business was bought by the Canadian diamond mining group, Aber Corp., in 2006 to create the Harry Winston Diamond Corp., with divisions in luxury retail and diamond mining. It was listed on the New York Stock Exchange in 2007.

The brand’s namesake (Harry Winston, March 1, 1896 – December 28, 1978) founded the luxury retail company in 1932. He was among the most famous jewelers in the world and the first jeweler to lend jewels to an actress for the Oscars red carpet in 1944. He was also famous for donating the Hope Diamond to the Smithsonian Institution in Washington.

The luxury diamond jeweler and timepiece retailer has salons in key locations—including New York, Paris, London, Beijing, Shanghai, Hong Kong, Singapore, Tokyo and Beverly Hills.

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

Swatch Group Acquires Harry Winston’s Luxury Retail Division for $1 Billion

The Swatch Group has acquired the famed Harry Winston luxury diamond jewelry and timepiece retail business for $750 million plus their assumption of up to $250 million of pro forma net debt. When this transaction is completed the company, Harry Winston Diamond Corp., will be solely in the diamond mining and distribution business.

The U.S. based division (Harry Winston Inc.) is a premier diamond jeweler and luxury timepiece retailer with salons in key locations—including New York, Paris, London, Beijing, Shanghai, Hong Kong, Singapore, Tokyo and Beverly Hills. The possible sale of the retail division was the subject of rumors for months, which the company denied in a statement issued in October.

The company’s namesake (Harry Winston, March 1, 1896 – December 28, 1978) founded the company in 1932. He was among the most famous jewelers in the world and the first jeweler to lend jewels to an actress for the Oscars red carpet in 1944. He was also famous for donating the Hope Diamond to the Smithsonian Institution in Washington.

The jeweler was bought by Canadian diamond mining group, Aber Corp., in 2006 to create the Harry Winston Diamond Corp., with divisions in luxury retail and diamond mining, which was listed on the New York Stock Exchange in 2007.

The transaction does not include the Canadian-based diamond mining activities of Harry Winston Diamond Corp., which has a 40 percent ownership interest in the Diavik Diamond Mine and is finalizing the purchase of the Ekati Diamond Mine, including its diamond sorting and sales facilities. Both mines are in the Northwest Territories of Canada.

When the transaction with Swatch is completed, this diamond business will operate under the name: Dominion Diamond Corporation.

Robert Gannicott, Harry Winston chairman and CEO, said changes in both luxury retail and the diamond markets, as well as the need for cash, led to the decision to sell its luxury retail operation.

“At the time that we purchased the Harry Winston brand, resource investment opportunities for diamonds were rare and expensive following the euphoria of the Canadian diamond discoveries, and the involvement of the large international mining companies,” Gannicott said in a statement. “The Harry Winston brand was competitively priced compared with its peers and we could bring diamond expertise and strategic connections to enhance value. Today there is a range of diamond resource opportunities while the value of heritage luxury brands has increased dramatically. This transaction represents a sound return on our original investment. It 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.”

The Swatch Group, based in Biel, Switzerland, is the world’s leading supplier of finished watches and watch movements and one of the world’s largest buyers of polished diamonds. The two companies said that they will also explore the opportunities for a joint diamond polishing venture bringing together the manufacturing and diamond expertise of the two companies.

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

The transaction is subject to the approval of the different regulatory authorities.

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Harry Winston to Pay $500 Million for Ekati Diamond Mine

Ekati Diamond Mine
Photo credit: Jason Pineau, through Wikipedia

Harry Winston Diamond Corp. said Tuesday that it has entered into share purchase agreements with BHP Billiton Canada Inc. and other affiliates to acquire all of BHP Billiton’s diamond assets, including its controlling interest in the Ekati Diamond Mine as well as the associated diamond sorting and sales facilities in Yellowknife, Northwest Territories and Antwerp, Belgium.

The Ekati Diamond Mine, located in the Northwest Territories of Canada, consists of the Core Zone, which includes the current operating mine and other permitted kimberlite pipes, as well as the Buffer Zone, an adjacent area hosting kimberlite pipes having both development and exploration potential. The agreed purchase price, payable in cash, is $400 million for the Core Zone interest and $100 million for the Buffer Zone interest, subject to adjustments in accordance with the terms of the share purchase agreements.

“Completion of this acquisition will bring the opportunity to marry our Canadian diamond sorting and marketing skills with an experienced mine operating and development team, a world class operating asset, and future growth potential,” said Robert A. Gannicott, Harry Winston chairman and CEO. “Together with our existing mining business, these assets will serve as our platform for sustained, disciplined growth in the upstream diamond sector.”

Harry Winston, known for its luxury retail salons throughout the world, also supplies rough diamonds to the global market through its 40 percent ownership interest in the Diavik Diamond Mine, also located in the Northwest Territories. The company was looking to sell its retail assets, according to media reports, which it denied. Harry Winston also was reportedly in talks to buy the remaining interest in Diavik from its partner in the venture, Rio Tinto Diamonds. Talks between Harry Winston and BHP Billiton for the Diavik Diamond Mine were first reported in August.

The Ekati Diamond Mine, approximately 310 kilometers northeast of Yellowknife in the Northwest Territories of Canada, includes both open pit and underground operations and is Canada’s first, and largest, diamond producer, having begun production in 1998.

The Ekati Diamond Mine has produced an average of approximately three quarters of a billion dollars of rough diamonds per year over the past five years, Harry Winston said in a statement. Over that period sales from the Core Zone represented approximately 6 percent of world rough diamond supply by value. The current phase of production at the Ekati Diamond Mine includes ore sourced primarily from the lower grade, but high carat value, Fox open pit supplemented by underground production from the lower portion of the Koala kimberlite pipe and from the Koala North pipe. Although production in the next two years is forecast to be lower than the average achieved over the last five years, it is expected to return to higher levels as the mine transitions to higher grade, but lower carat value, ore from the Misery and Pigeon open pits. The current Ekati mine plan calls for a further seven years of production, but there are additional resources which could become economic with increased diamond prices.

The Core Zone and the Buffer Zone are subject to separate joint venture agreements. BHP Billiton holds an 80 percent interest in the Core Zone and a 58.8 percent interest in the Buffer Zone, with the remainder held by the Ekati minority joint venture parties. Harry Winston has agreed to purchase BHP Billiton’s interests in each of the Core and Buffer Zones. Pursuant to the joint venture agreements, BHP Billiton will first separately offer to the joint venture parties its interest in each of the Core and Buffer Zones on the same terms as those agreed to by Harry Winston. The joint venture parties will then have 60 days to elect to acquire either or both of those interests. Any interests that the joint venture parties do not elect to acquire within that time period can then be transferred to the Company in the following 60 days.

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Harry Winston Is Not For Sale

The Harry Winston salon in Paris.

Harry Winston Diamond Corp. issued a statement Thursday saying it is not in talks to sell its luxury jewelry and watch business.

“While it is the company’s general policy not to comment on market rumors, it confirms that it has received various indications of interest regarding a potential purchase of its luxury brand segment. It is not in active negotiations regarding any such transaction,” it said in the statement. “The company does not intend to make any further public announcements regarding this matter unless it concludes that they are warranted by the circumstances or are required by law.”

The statement came as a result of stories from Reuters and other outlets stating that Harry Winston “has been approaching potential buyers such as luxury groups LVMH and PPR.”

Harry Winston Diamond Corp. is a business with assets in the mining and retail segments of the diamond industry. Harry Winston supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine. The company’s luxury brand segment is a diamond jeweler and luxury timepiece retailer with salons in key locations throughout the world.

Harry Winston shares ownership of the diamond mine in the Northwest Territories of Canada with mining giant Rio Tinto, which owns a 60 percent stake. The miner has announced its intention to sell all of its diamond mines to concentrate in larger mining segments. Harry Winston was reportedly in talks to buy the mine outright.

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Harry Winston’s Growth Ends in Q3

Harry Winston salon in Paris

Harry Winston Diamond Corp., the luxury retail jeweler and supplier of rough diamonds, saw its retail sales slow to a crawl and its diamond business take a nosedive for the third quarter of fiscal 2012.

Sales in the Toronto-based company’s mining segment fell 40 percent, year-over-year, to $36.2 million for the quarter, ended October 31. Rough diamond production for the period increased 8 percent to 800,000 carats for the period. Harry Winston has a 40 percent ownership stake in the Diavik Diamond Mine in Canada’s Northwest Territories. Mining giant Rio Tinto owns the other 60 percent.

For the luxury brand segment, sales increased 4 percent, year-over-year, to $83.5 million compared to $80.2 million in the same quarter of the prior year. At constant exchange rates, sales decrease by 4 percent. Harry Winston is a premier diamond jeweler and luxury timepiece retailer with luxury salons in key locations around the world.

“Challenging trading conditions returned to the diamond business internationally in the third quarter,” said Robert Gannicott, Chairman and CEO. “However, this was not the sudden, hard shock of 2008/2009 and, being better equipped to weather a downturn than in 2008/9, we elected not to sell the full rough diamond production into a weak market during the quarter but continued to supply the segments where demand remained resilient. We have now resumed a wider range of rough diamond sales as the market has recovered some poise in the light of continuing good consumer demand. Our luxury brand segment has seen increased unit sales as we continue to broaden the focus of our jewelry and timepieces.”

Rough diamond price during the third quarter was $159 per carat from 200,000 carats sold compared to $95 per carat from 600,000 carats sold in the comparable quarter of the prior year, the company reported. The price difference is primarily the result of the stockpiling of some lower priced diamond assortments which currently face competition from the recent sale of stocks of similar quality Zimbabwe diamonds. At October 31, 2011, the company was holding 1.1 million carats of rough diamond inventory with an estimated value of $123 million at current market prices.

Mining segment EBITDA was $16.7 million in the quarter compared to $24.9 million in the comparable quarter of the prior year. After accounting for the $13 million ($8.4 million tax effected) non-cash de-recognition charge related to a backfill plant no longer needed in revised underground mining methods, this segment recorded an operating loss of $3.3 million. Excluding this charge, the mining segment would have recorded an operating profit of $9.7 million in the third quarter compared to $9.4 million in the same quarter of the prior year.

The luxury brand segment generated EBITDA of $4.5 million and an operating profit of $1.3 million in the third quarter 2012 compared to EBITDA of $8.6 million and operating profit of $5.4 million in the comparable quarter of the prior year. The decreased operating profit is a result of the seasonal increased marketing expenditure leading into the holiday season and expenses related to the anticipated opening of new salons in China during early 2012.

The Company had $83.2 million of cash and $106.2 million availability in its credit facilities as of October 31.

Harry Winston Sales Up While Profits Decline

Harry Winston saw a 98% increase in retail sales.

Harry Winston Diamond Corp. saw its luxury retail sales nearly double along with a modest increase in rough diamond sales, but it wasn’t enough to lift profits for the Toronto-based company.

The company said Wednesday that second quarter consolidated sales increased 44.7 percent percent to 222.4 million year-over year, resulting in a 6 percent increase in gross margin to $72.2 million and an operating profit of $23.1 million, compared to an operating profit of $29.9 million in the comparable quarter of the prior year. Consolidated EBITDA was $43.8 million compared to $49.4 million in the comparable quarter of the prior year.

Despite the sales increase, net profits fell 23 percent to $10 million.

Harry Winston consists of two businesses. The first supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine. The company, however, is internationally known for its second business as a premier diamond jeweler and luxury timepiece retailer with salons in key locations throughout the world, including New York, Paris, London, Beijing, Tokyo, Hong Kong and Beverly Hills.

The luxury brand segment reported a 98 percent increase in sales to $132.8 million for the period, year-over-year. At constant exchange rates, the increase was 81 percent. Included in the second quarter was $55.6 million of high-value transactions, which generally carry lower-than-average gross margins. Operating profit was $6.8 million for the quarter compared to $2.3 million in the same quarter of the prior year. EBITDA for the luxury brand segment was $10.1 million compared to $5.5 million in the comparable quarter of the prior year.

“Global retail demand, especially in the emerging economies such as China and India, has delivered both strong retail sales growth and strong rough diamond prices. Seeing through the effect of a small number of high-value, lower margin sales, our own jewelry and timepiece business shows solid growth in both sales and margin in the core bridal, timepiece and designed jewelry segments,” said Robert Gannicott, Harry Winston chairman and CEO.

Meanwhile, sales from its mining segment increased 3 percent to $89.6 million for the second quarter, year-over-year, resulting primarily from a 41 percent increase achieved in rough diamond prices, offset by a 27 percent decrease in volume of carats sold. The mining segment recorded operating profit of $16.3 million compared to $27.6 million in the comparable quarter of the prior year. EBITDA for the mining segment was $33.7 million compared to $44 million in the comparable quarter of the prior year.

“The market price increase in rough diamonds has more than compensated for two complete sales versus three in the comparable prior year quarter as well as the lower quality diamonds mined from the upper part of the current open pit,” Gannicott said

“Looking forward we continue to see strong global jewelry and timepiece demand from China while Japan and the Middle East improve and the U.S. remains subdued. On this basis we expect to continue to grow our own jewelry and timepiece business despite challenging economic conditions in the U.S. and Europe. Although we do not predict further near-term rough diamond market price increases we do see our own rough diamond sales price already improving.”

William and Kate Receive Canadian Diamond Jewelry

Diamond cufflinks and brooch that were given to the Duke and Duchess of Cambridge.

While visiting the Canadian Northwest Territories Tuesday, the Duke and Duchess of Cambridge received a brooch and cufflinks made of locally mined diamonds.

The gift for the royal couple is appropriate from this most remote part of Canada because the area is known for diamond mining and it currently supplies 10 percent of the world’s diamonds by value. The brooch and the cufflinks are in the shape of polar bears and contain 302 stones and 390 stones respectively. The pieces were made by the Harry Winston Diamond Corp.

The diamonds were mined in Diavik Diamond Mine, about 190 miles north of Yellowknife, the capital of the Northwest Territories. Harry Winston, known internationally as a luxury jeweler, co-owns the diamond mine with mining giant, Rio Tinto Group.

Read more about the gift at Forbes.com.

Harry Winston Q1 Consolidated Sales Up 26%

Harry Winston salon in Paris

Harry Winston Diamond Corp. seems to have the best of both worlds with its businesses in diamond mining sector and as a luxury jewelry and watch retailer. Both market segments have shown strong growth over the past year and this is continuing as the Toronto-based company reported Wednesday that consolidated sales increased 26 percent for the first quarter of fiscal year 2012. The increase at constant exchange rates was 22 percent.

Luxury brand sales, through its network of salons that sell luxury jewelry and watches in key cities throughout the world, increased 26 percent to $81.9 million for the quarter, ended April 30, primarily driven by stronger high jewelry sales in the United States and higher timepiece sales. The increase at constant exchange rates was 20 percent.

In addition, Harry Winston, which supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine in Northwestern Canada, said mining sales increased 27 percent to $62 million, primarily due to higher rough diamond pricing versus the comparable prior year period. Rough diamond output, for the period ended March 31, dropped to 500,000 carats compared to 600,000 carats for the same period last year.

“This quarter's results reflect improving rough diamond prices combined with increasing sales and profit for the luxury brand segment. Both sides of our diamond business are performing well as we continue to achieve premium rough diamond prices and execute our luxury brand strategy,” said Robert Gannicott, Harry Winston Chairman and CEO.

To shore up its stockpile of polished diamonds it uses for luxury jewelry lines and to maximize the continued rise in prices for what many believe is a dwindling resource; Harry Winston in May announced that it is involved in the establishment a polished diamond investment fund. The fund is being managed by Diamond Asset Advisors AG, a Zurich based advisor with a background in both the diamond and financial services sectors. The fund will be structured as a limited partnership, of up to $250 million, offering institutional investors direct exposure to the wholesale market price of polished diamonds.

“Our recently announced relationship with Diamond Asset Advisors in the creation of a polished diamond acquisition fund represents an innovative way for the company to support its luxury brand growth objectives,” Gannicott said.

Other first quarter highlights, include:

* Consolidated EBITDA (earnings before interest taxes depreciation and amortization) in the first quarter of Fiscal 2012 increased 51 percent to $25 million, showing strength in both segments of the business, the company said. In the same period, the mining segment EBITDA increased 48.5 percent to $17.6 million and the luxury brand segment EBITDA increased 57.3 percent to $7.3 million.

* Consolidated operating profit was $4.7 million or double the operating profit of $2.3 million from a year ago, with mining operating profits down $300,000 and luxury brand profits up $2.7 million versus the prior year. Operating profit benefited from higher rough diamond prices and higher high-end jewelry and timepiece sales, the company said.
 
* Consolidated net profit attributable to shareholders for the first quarter was $3.6 million or $0.04 per share compared to net profit attributable to shareholders of $2.1 million or $0.03 per share in the comparable quarter of the prior year.

Harry Winston Names New CFO

Harry Winston Diamond Corp. has appointed Cyrille Baudet to the position of group chief financial officer, reporting to Frederic de Narp, chairman and CEO. Baudet replaces Alan Mayne, who helped steer the luxury diamond jewelry retailer and diamond mining company through the turbulence of the recent global financial crisis. Mayne will remain with the company for a transition period till April 30.

With the appointment of Baudet, the structure of the finance group will also change. Wendy Kei will assume the role of CFO of the mining and rough diamond sales team based in Toronto while Robert Scott continues as CFO of the brand retail and wholesale business based in New York. Baudet will remain based in Geneva at Harry Winston's watch manufacturing facility before moving to North America later this year.

Baudet began his career with Ernst & Young in Africa and Paris auditing oil and mining companies in Africa followed by a period with PricewaterhouseCoopers in London where he focused on software companies. He joined Richemont Intl. as group senior internal auditor followed by assignments as controller for Alfred Dunhill in London and Cartier Intl. in Paris and Geneva before becoming the controller for Cartier North America based in New York. Most recently he was the regional CFO for the Richemont Group businesses in Europe, the Middle East and South America. He is currently based in Geneva.

Harry Winston Diamond Corp. is a specialist diamond enterprise with assets in the mining and retail segments of the diamond industry. It supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine. The company's retail division is a premier diamond jeweler and luxury timepiece retailer with salons in key locations, including New York, Paris, London, Beijing, Tokyo and Beverly Hills.

Harry Winston Reports Strong Retail and Rough Diamond Sales

Harry Winston Diamond Corp. reported Wednesday that consolidated sales increased 62 percent to $153.7 million for the second quarter in a year-over-year comparison. Earnings for the period, ended July 31, were $28.9 million, compared to a loss of $3.9 million for the same quarter of the prior year.

Rough diamond sales rose 89 percent to $86.8 million for the quarter, year-over-year, according to the vertically integrated company with assets in a diamond mine along with luxury retail stores. The increase in sales was a result of a combination of a 62 percent increase in rough diamond prices and a 17 percent increase in volume of carats sold during the quarter.

Retail sales increased 37 percent to $66.9 million for the second quarter. U.S. sales increased 31 percent to $19.6 million, sales in Europe increased 40 percent to $24.7 million, and sales in Asia increased 40 percent to $22.6 million. Earnings from operations of $2.3 million for the quarter compare favorably to a loss of of $5.6 million, in the same quarter of the prior year.

Rough diamond production for the three months ended June 30, was 0.65 million carats, which was 14 percent higher than the comparable quarter of the prior, the company said. Production in the same quarter last year was unusually low, due to the planned lower volume of ore mined that reflected the softness in the rough diamond market last year.

Consolidated net income for the second quarter was $16.5 million, compared to a net loss of $24.5 million in the second quarter of the prior year.

“This quarter has demonstrated the continued recovery in the international diamond business and it has also shown additional improvement from our own business segments,” said Robert Gannicott, Harry Winston chairman and CEO. “Both mine production and rough diamond sales increased in parallel with the growth in retail sales from our network of international stores particularly at the high end. We expect further growth in retail sales supported by renewed marketing efforts as customers seek out true craftsmanship.”

The company also announced Wednesday that it appointed David Carey, president of Hearst Magazines, to its board of directors. Prior to joining Hearst, Carey was group president at Condé Nast, where he served as a member of the company's executive committee and co-lead on all business development efforts, and in other positions at Condé Nast since 1995.

Harry Winston Diamond Corp. has assets in the mining and retail segments of the diamond industry. It supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine. The company's retail division is a diamond jeweler and luxury timepiece retailer with salons in key locations, including New York, Paris, London, Beijing, Tokyo, and Beverly Hills.