Billionaire to Buy Some Peace Mark Assets

Hong Kong billionaire and business magnate Cheng yu-Tung has agreed to pay over $90 million ($HK700 million) for some assets of bankrupt Hong Kong luxury watchmaker and retailer Peace Mark (Holdings) Ltd., say Peace Mark’s liquidator and Hong Kong and Shanghai press reports.

Chow Tai Fook Enterprises, Cheng’s privately-held conglomerate which includes jewelry stores, will take over some of Peace Mark’s retail businesses in China, Hong Kong, Macau and Taiwan, say the reports and provisional liquidator Ferrier Hodgson. The deal reportedly includes Rolex shops in Tsim Sha Tsui, Hong Kong (but not TimeZone stores there, which sell mid-range watches).

Approval of the deal by Hong Kong’s high court, and a formal announcement, is expected as early as this week.

At press time, it was unclear how the deal affects the Swiss-made Milus luxury watch brand, owned by Peace Mark, or Peace Mark’s agreement with Tourneau, Americas biggest watch retailer, to build a chain of fine watch stores in China. Also uncertain, until the official announcement, is if the deal includes any of Peace Mark’s six watch factories in the mainland China.

Peace Mark has already sold its Swiss watchmaking facilities (STM Holding, which makes about 300,000 mechanical movements and 100 million quartz movements annually, and has high-end clients) two weeks ago to the Festina group, the upscale Spanish watch company, whose several brands include Festina, Jaguar and Perrelet.

Cheng yu-Tung, 82, has extensive real estate and business interests (retail, telecom, hotels, gold and diamonds) in Hong Kong and Southeast Asia. His privately-held Chow Tai Fook conglomerate is active in jewelry retailing and local real estate. He chairs the publicly-listed New World group (property, services and telecommunications) and is on the board of Hong Kong’s third-largest bank. His businesses employ 80,000 people worldwide and do $5 billion in annual sales, say published reports.

Peace Mark is an international Hong Kong-based watch maker, distributor, and retailer, with offices and markets in the United States, Europe, China, and other Asian countries. It has more than 1,000 points of sale (mainly China); 10,000 employees in China and abroad, and annual earnings of about $900 million.

Its own watch brands include Milus and Sergio Valente, while among its many licensed timepieces are Bill Blass, Fiorucci, Montana, Pierre Cardin, and Technos. It also distributes many other brands—including Faconnable, Givenchy, Marie Claire, Nina Ricci, and Technomarine—in China. One Hong Kong paper calls Peace Mark “the bridgehead of the Swiss watch industry” in the Far East. According to one watch trade expert, two thirds of Swiss watches in China are distributed by Peace Mark.

In addition to watchmaking (mechanical and quartz), retailing and marketing, Peace Mark also has exclusive rights to operate De Beers retail stores in China and develop that market for the French high-end jewelry brand Boucheron. A 2006 joint-venture with Tourneau, America’s largest watch retailer, is developing a chain of fine watch stores under Tourneau’s name in mainland China, Hong Kong, Macau and Taiwan. Tourneau officials, when contacted by JCK about Peace Mark’s situation, have had no comment.

In late 2007, Peace Mark bought STM (a movement-making competitor to ETA, Seiko and Citizen), and bought controlling interest in Sincere Watch, a chain of 150 fine watch stores in southeast Asia. Earlier this year, Peace Mark secured a $500 million bridge loan from international banks to finance that purchase and existing loans.

This summer, though, its stock price on the Hong Kong Exchange began falling on rumors about its financial situation. In August, the company suspended trading; soon after an English private equity firm withdrew a buyout offer.

In early September, Peace Mark announced it couldn’t meet some bank demands to repay $156 million. Lenders cancelled the bridge loan, making it difficult for Peace Mark to repay existing loans and prompting demands from other creditors. On Sept. 11, two “provisional liquidators” (similar to bankruptcy administrators) of Ferrier Hodgson, specialists in corporate recovery and insolvency—with agreement of Peace Mark and major creditors–took over and began what they called “an urgent assessment of [Peace Mark’s] financial position and operations” in consultation with management, creditors and other stakeholders. One of those, Tay Liam Wee, 49, head of Sincere Watch and formerly its main shareholder, resigned Sept. 12 as a non-executive director of Peace Mark after only five months, saying he never got “clarification” of various matters from Peace Mark’s management, despite repeated requests. Shortly afterward, a U.S. private equity investment firm decided not to invest in Peace Mark.