Aber Diamond Corp. has entered into an agreement to purchase the minority shareholders’ interest in Harry Winston, for approximately $157 million giving it 100 percent ownership.
The transaction values Harry Winston, on an equity basis, at approximately $330 million. Aber said it will finance the acquisition through a combination of cash resources and an increase to Aber’s existing credit facility without impacting the existing dividend policy.
Aber purchased an initial 51 percent stake in Harry Winston in April 2004 for $85 million and has since increased its equity interest to approximately 53 percent. The original purchase agreement included an option allowing Aber to purchase the balance of Harry Winston in 2010.
“The past two and half years have demonstrated the tangible benefits of linking the marketing of rough diamonds to a high-end diamond retailer in the form of improved margins at both ends of the business,” Robert Gannicott, chairman and chief executive officer of Aber, said in a statement. “This acquisition solidifies our position as the world’s premier publicly traded diamond company.”
Aber said full ownership of Harry Winston strengthens the diamond company’s strategic position in mining and retailing by delivering premium rough diamond pricing through market insight provided by polished diamond buying. Aber said it has been able to leverage its role as a supplier of rough diamonds to secure a more reliable source of the high-quality polished diamonds for Harry Winston.
Since Aber’s initial investment, Harry Winston sales have grown from approximately $128 million in 2004, to $191 million for 2006.
“The market for luxury goods, including diamond jewelry, is one of the fastest growing segments of the consumer market,” said Thomas O’Neill, Aber’s president and chief executive officer of Harry Winston. “We believe that given the recognition of the brand relative to the size of the store network, there is an opportunity for significant growth. We are now able to expand at a pace consistent with the opportunities of the marketplace. This enables us to open new stores at an aggressive pace, as well as refurbish our existing store network. We plan to strengthen our product development, increase our manufacturing capabilities, and improve management efficiencies across the businesses.”
The history of the House of Harry Winston dates back nearly 100 years and includes some of the most famous diamonds in the world, from the legendary Hope Diamond, now on permanent display at the Harry Winston Pavilion at the Smithsonian Institution, to the magnificent jewels owned by royalty, movie stars and heads of state.
“Harry Winston is performing even better than we originally anticipated. The timing and the terms of the deal allow our shareholders to benefit earlier from the continued growth of Harry Winston,” concludes Gannicott.