Breaking News: Swatch Group acquires Harry Winston for $1 Billion

JUST IN…The Swatch Group Ltd. in Biel/Bienne acquires 100% of Harry Winston Inc. for $1 billion (US $750 million cash + $250 million debt).  The Swatch Group acquires the brand and all the activities related to jewelry and watches, including the 535 employees worldwide and the production company in Geneva (Switzerland).  Our brief analysis, below.

Update:  IMPLICATIONS/ANALYSIS.  A big deal today for the watch world, no doubt.  Harry Winston goes from being independent to part of the largest watch conglomerate in the world.  And Swatch gets an superb entry into the jewelry market.  A few things to consider:

** Harry Winston will be part of what Swatch calls its “prestige brands” group and includes the likes of Breguet, Blancpain, Glashutte Original, J Droz, and Omega.  Speaking of which, I guess this means Breguet has some new competition for top-standing in the Swatch portfolio :-)  Actually, I expect Breguet to retain its status as Swatch’s top watch marque (it was the personal baby of the late Swatch Group founder Nicholas Hayek).  Unlike HW, Breguet is singularly focused on watches and I expect it to stay this way.  Which brings my next point…

** SWATCH ESTABLISHES MAJOR FOOTHOLD IN JEWELRY.  Prior to Harry Winston, Swatch was not known for its jewelry portfolio. Harry Winston — known first as a maker of the finest jewelery — changes this, big time.  I think that the acquisition of Harry Winston is likely the foundation of a broader push into jewelry for Swatch.   Think Richemont’s Cartier vs. Swatch’s Harry Winston.

** Vast array of Swatch resources now at Harry Winston’s disposal.  This means new access to movement making and other “back-end” watchmaking resources will surely be leveraged by Winston going forward.  To what extent, we’ll have to see.

** I expect the core Harry Winston portfolio to remain generally unchanged. Same watches, same Opus etc.  If anything we might see a broader distribution footprint for HW (again, leverageing Swatch), but I would expect this to occur at a measured pace.  Swatch will not want to dilute the Harry Winston brand, and I suspect expansion plans for watches will be reserved, at least in the mid-term.

We’ll see how things play out over the next 5-10 years.

Note:  the transaction does not include the mining activities of Harry Winston Diamond Corporation (TSX: HW, NYSE: HWD).