Harry Winston looking to sell luxury business: source

Wed Oct 17, 2012 4:32pm EDT
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PARIS (Reuters) - Harry Winston Diamond Corp HW.TO is looking to sell its watch and jewellery business to concentrate on mining, and has been approaching potential buyers, a source close to the matter said.

"They are looking to sell these assets and are doing the rounds among potential buyers," the source said.

Talk of a potential sale sent shares of the jeweler soaring more than 10 percent on the Toronto Stock Exchange early on Wednesday. The stock closed up 3.67 percent at C$13.83.

As always when this type of activity hits the market, the big names in luxury, like LVMH (LVMH.PA: Quote) and PPR (PRTP.PA: Quote), figure prominently among potential acquirers.

The value of Harry Winston's luxury segment, which includes watches, jewellery and retail salons around the world, is around $766 million, or $9 per share, said RBC Capital Markets analyst Irene Nattel in a note to clients.

"But on a transaction basis, we would expect (Harry Winston) to get a premium," she said. "Looking at precedent transactions, the range is relatively wide, but the most relevant appears to be the late 2011 acquisition of Bulgari by LVMH."

LVMH bid 3.7 billion euros ($4.85 billion) for Italy's Bulgari in March 2011, offering a 60 percent premium to the average share price over the month prior to the deal.

By applying the same premium, Nattel sees Harry Winston's luxury brand alone worth some $1.2 billion net of debt, or $14 per share. She maintained her "outperform" rating and $19 price target on the stock.

LVMH, the world's biggest luxury group, owns jewelers Fred and Chaumet as well as watchmakers Tag Heuer, Hublot and Zenith and is on the lookout for potential acquisitions.   Continued...