Swatch makes $1 billion diamond buy

The watchmaker picks up Harry Winston's jewelry division to rebound from a split with Tiffany.

By Jason Notte Jan 14, 2013 3:07PM
File photo of shoppers in a Swatch store in New York ( Mark Lennihan/AP Photo)Swatch really wants to be considered a luxury brand, even if competitors like Tiffany (TIF) would rather it return to its plastic '80s beginnings.

The world's largest watchmaker just purchased Harry Winston Diamond Corp.'s (HWD) jewelry division for $750 million and sank another $250 million into that company's debt just to show it means business, according to Bloomberg.

If Swatch wanted to make a big splash in the luxury market, it doesn't get less subtle than Harry Winston. The jeweler has been on the high end for almost 70 years after lending its wares to stars walking the red carpet at the Academy Awards.

But Swatch, based in Biel, Switzerland, cares less about star power than it does about sticking it to Tiffany, whose watch brand was formerly run by Swatch. The two companies parted ways acrimoniously in 2011, with Swatch reportedly citing Tiffany's "systematic efforts to block and delay development of the business" and Tiffany countering that Swatch "failed to provide appropriate distribution for Tiffany & Co. brand watches" and stifled its income as a result.

Swatch filed a multibillion-dollar suit against Tiffany at the end of 2011, with Tiffany countering with a nearly $600 million suit of its own last March. Their plan to match Italian luxury watch maker Bulgari's sales imploded and Tiffany still hasn't quite recovered, as a 4% sales increase during the holiday season fell well short of expectations.

Swatch, meanwhile, just fell into a diamond mine. Harry Winston Diamond has been a little distracted from retail sales of its big-money baubles after being purchased by Canada's Aber Diamond Corp. In November, Harry Winston announced it was paying was paying $500 million to mining company BHP Billiton (BHP) for a controlling stake in Canada's Ekati diamond mine.

Harry Winston's mining operations will continue independently, but Harry Winston Diamond will continue providing Swatch with polished diamonds for its pieces and is looking into a joint diamond venture with Swatch once the jewelry division deal goes final. Harry Winston Diamonds noted in its press release that Swatch is one of the world's largest diamond buyers and a good partner to keep around.

Tiffany may disagree, but Marylin Monroe didn't name drop Tiffany in "Diamonds Are A Girl's Best Friend" as she did with Harry Winston. Forget plastic multicolored watches: The only rainbow Swatch is interested in these days is that made by the prisms in Harry Winston's Canadian ice.

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