Swatch to Buy US Jeweler Harry Winston for $1 Billion

By Marta Falconi

ZURICH--Swatch Group (UHR.VX) said Monday it had agreed to buy U.S. watch-and-accessory company HW Holdings Inc., owner of the Harry Winston brand, for $1 billion, in an acquisition that strengthens its presence in the U.S. market and helps it expand into jewelry.

Biel, Switzerland-based Swatch will buy all of HW Holdings, which employs 535 people worldwide and operates a production company in Geneva, for $750 million. It will also assume as much as $250 million in net debt.

The all-cash deal, which breaks with Swatch's recent practice of buying parts companies, comes after a partnership between Swatch and Tiffany & Co. (TIF) fell apart last year.

New York-based Harry Winston, famous for donating the Hope Diamond to the Smithsonian Institution, makes diamond engagement rings and pins, as well as high-end wristwatches.

Harry Winston "brilliantly complement(s) the prestige segment of the group," said Chairwoman Nayla Hayek in a statement.

The deal comes just days after Swatch, best known for its inexpensive plastic watches, reported record full-year sales of 8.14 billion Swiss francs ($8.9 billion). The company owns a range of brands, including Breguet and Blancpain, whose watches can retail for more than $300,000.

Jon Cox, an analyst at Zurich-based Kepler Equities, said the acquisition makes strategic sense as Swatch tries to boost its high-end jewelry watches segment, which has enjoyed strong growth despite a sluggish global economy. Mr. Cox has a buy rating on Swatch.

The deal doesn't include the mining activities of Toronto-based Harry Winston Diamond Corp., Harry Winston's ultimate parent. Harry Winston Diamond Corp. will change its name to Dominion Diamond Corp. when the transaction is completed. The deal is subject to regulatory approval.

In early trading, Swatch shares were up 4.4% at CHF514.

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