Why Swatch is Mad About Harry, and Why Winston is Exiting the Luxury Biz

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Swatch Group’s new year surprise — that it’s paying $1 billion to acquire the luxury unit of Harry Winston Diamond Corp. — is making observers beyond the jewelry business watch both brands more closely.

Canada’s Harry Winston Diamond Corp.’s $1 billion sale ($750 million plus $250 million in debt) of its luxury business to Switzerland’s Swatch Group AG provides the cash for Winston to invest more in diamond mining, a business that last year was more than twice as profitable as jewelry.

Shares in Toronto-based Harry Winston rose 4.4 percent on Monday after the deal was announced. The high-end company’s chairman and CEO, Robert Gannicott, told The Globe and Mail that the company planning will use the cash to focus primarily on mining after eight years as a luxury jewelry brand. His plan: purchase the 60 percent stake of the Diavik mine it doesn’t already own from Rio Tinto Group.

In addition to Winston exiting the luxe jewelry-selling business, the deal will have an impact on Swatch Group’s (relatively) cheap and cheerful Swatch brand.[more]

As the Wall Street Journal notes, “Best known for its playful plastic timepieces, Swatch Group AG paying $750 million to buy the swanky Harry Winston brand—the diamonds that Marilyn Monroe cooed about in the movies.”

The Swatch brand of watches hit the scene in 1983 and were famed as being so inexpensive that they were practically disposable. Fans sometimes wore two at once, with some club kids wearing them as ponytail holders. Yet consumers may not be aware that its parent, Swatch Group Holdings, is the largest watchmaking group in the world, and already in the luxury business with a stable of brands that includes Blancpain, Breguet, Longines, Omega, Tourbillon and now Harry Winston.

So this corporate deal may change the public perception of Swatch’s brand, as it owner is now more firmly (pending approval of the deal) in the luxury business with the Winston acquisition — a brand that sells such items as “a timepiece in the shape of a creeper vine and decorated with 84 carats of diamonds” and another that is made up of 607 parts, as Bloomberg reported. It’s a smart move for Swatch Group, publicly, since its partnership with Tiffany & Co. fell apart due to a legal dispute back in 2011. 

“It ticks all the right boxes,” said Jon Cox, an analyst at Kepler Capital Markets, told Bloomberg. “Swatch has been saying for years that they want to get into jewelry and they’ve also been looking to expand in the U.S. Harry Winston isn’t as well-known as Tiffany or Cartier because it has always been much smaller, but it does have a very good position in the high-end market.”

So now Swatch has Harry Winston in its back pocket, what’s next? Time will tell.

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