Watch acquisitions and concentration in 2000: a year of a buying binge

The Swatch Group acquires Jacquet Droz
Richemont acquires Les Manufactures Horlogères for 3,08 billion SFr
The Swatch Group takes over watch hands producer Universo
Rolex acquires Beyeler & Cie
Richemont buys Stern, the dialmaker
Gucci Group acquires Boucheron and the Yves Saint-Laurent
Bulgari buys Gerald Genta and Daniel Roth



The Swatch Group acquires Jaquet-Droz, maker of timekeepers and automatons:
It is another piece, perhaps modest now but whose importance may very well be measured by its future performance, that has been displaced on the very agitated chessboard of mergers and acquisitions in the watch industry. By gaining control of Jaquet-Droz, the Swatch Group has added a rare jewel to its high-end range of fine timepieces, already strengthened by the addition of the Breguet group last year.
Jaquet-Droz is no newcomer to the world of takeovers. This maker of timekeepers and automatons was successively held by Investcorp, then by FranÇois Bodet and Yves Scherrer, formerly of the Breguet Group, when finally it fell into the fold of the financial company Cupola, a group funded by Arab and Anglo-Saxon capital.
The Swatch Group ’s new addition could very well be called upon over the long term to play a more important role than seems evident at first glance. The Swatch Group is dominant in the mid-range and in large-scale distribution networks but does not hide its aspirations of competing with the likes of Richemont, the LVMH and the Gucci group on their own turf.
Jaquet-Droz is quite active in the areas of prestige and sophisticated mechanical watches and automatons. It is among the world's last producers of these intricate and splendid mechanical pieces, making only a few dozen per year. Most are destined to a very exclusive circle of collectors found primarily in the Middle East. The future will tell in which direction the Swatch group intends to develop this very selective niche brand.



Richemont acquires Les Manufactures Horlogères (LMH) for 3,08 billion Sfr:
Swiss-based Richemont SA acquires Jaeger-LeCoultre, IWC and A. Lange & Söhne for 3,08 billion SFr in cash, in the Les Manufactures Horlogères brand package sold by Mannesmann AG. Through this highest bid in the history of luxury watches, Richmont outruns its rivals and reinforces its position in the luxury watch sector. Other famous brands owned by the group include Cartier, Piaget and Vacheron Constantin.



The Swatch Group takes over watch hands producer Universo:
With the purchase of Universo, the group of Nicolas Hayek has significantly strengthened its industrial hegemony. Very clearly, its global strategy involves not only strengthening the brands it owns or will acquire, but also increasing its industrial might. This will make it a formidable layer in the international watch arena since nearly all the other smaller players will depend on it to supply components parts.
Founded in 1909, Universo is the world's largest producer of watch hands. With 580 employees scattered over various sites in the watch district of western Switzerland, this company manufactures approximately 100 million hands of all types for an estimated turnover of about CHF 90 million (US$ 55 million).
The Swatch Group was Universo's primary client, purchasing around 50% of its output. In addition, the hand manufacturer has a portfolio of some 500 clients that represent nearly the entire watch industry, including groups competitive to Swatch such as the LVMH, Richemont and the LMH.
In a recent press release, the Swatch Group reaffirmed that the group has always guaranteed the supply of essential watch parts that it produces to any interested party. The Group also intends to invest in new production equipment in order to increase the capacity and reduce delivery deadlines that have been a prickly problem in the past.



Rolex acquires dial manufacturer Beyeler & Cie.
With its purchase of Beyeler & Cie for an undisclosed sum, Rolex has taken control of one of its privileged suppliers with whom it has a favoured relationship for the last sixty years. Rolex has indicated that it aims to master the principal elements of its product in the global optic of development and growth.
The Geneva brand is well on its way to progressively obtaining total independence for its means of production, which now include cases, movements and components parts. Two years ago, Rolex bought Gay Frères SA, the maker of watch bracelets. With Beyeler & Cie, the prestige watchmaker can now control its own dial production as well. Rolex announced that all of the employees of its new addition will be kept on board.


Richemont buys Stern, the dialmaker.
The Stern group, specializing in the manufacture of high quality watch dials, includes mainly clients in the prestige range. Employing some 280 people, the firm realized an estimated turnover last year of about CHF 40 million (US$ 25 million), for a production volume of around 600,000 pieces.
For the same reasons that the Swatch Group wanted to purchase Universo or Rolex wanted Beyeler, the Richmont decided it needed to buy one of its suppliers. This is seen as an important step in the march towards increased control over its own means of production.
Some of Stern's clients are Cartier, Vacheron Constantin, Piaget, Baume&Mercier. Richemont, however, has announced that Stern will not be vertically integrated into the group but rather will remain a profit center supplying dials to other clients as well, notably Rolex, IWC and Lange & SÖhne among others.



The Gucci Group acquires Boucheron and the Yves Saint-Laurent label for watches and jewellery.
The Gucci Group, under the direction of FranÇois Pinault, has just taken the French jeweller Boucheron under its wing. This acquisition is seen as one more step in the formation of a large luxury group that can compete directly with the LVMH. Founded in 1858, Boucheron's most recent owner was the Swiss chemical holding company, Schweizerhall Holding AG, which has controlled the prestige jeweller since last year.
A fairly diversified enterprise, Boucheron realized an estimated turnover last year of about CHF 185 million. By category, 57% of its sales came from perfume while 43% came from jewellery and watches. Of the latter, 35% was due to the company's timewear collections with a production in the neighbourhood of 10,000 pieces.
The new owner is certainly in a position to bring any necessary capital to the table for the international development of the brand. It is highly likely that it would also put its primary efforts into increasing the distribution of Boucheron signed watches and jewellery in order to make the brand into a veritable global player. We should be seeing a large palette of new and varied products that would increase the label's visibility; thereby increasing its image and brand awareness.
In addition to its acquisition of the well-known jeweller, the Gucci Group has also announced that it will obtain the licences to make watches and jewellery under the Yves Saint-Laurent name, whose rights were previously held by Cartier International. Timepieces bearing the celebrated French couturier's signature have been notoriously under exploited. Principally distributed in Japan and equipped with Citizen movements, the YSL watch lines were not really up to the level of the reputation of the overall brand. But under the Gucci Group, they will be completely re-examined, with additional collections being manufactured by Gucci timepieces in Neuchâtel, Switzerland. New products are scheduled to be introduced as early as 2001.
On the distribution front, the Gucci group has announced the creation of a joint venture with F.J. Benjamin holdings Ltd. of Singapore. This is seen as a way to considerably strengthen the brands distribution in the Asia-pacific region, notably by opening new YSL boutiques.


Bulgari acquires brands Daniel Roth, Gerald Genta and the Manufacture de Haute Horlogerie.
It has been known for some time now that Hour Glass, owner of the brands Daniel Roth and Gerald Genta, was having difficulties in its primary retail activities in its home base of Singapore as well as in its brand activities in Switzerland. These problems result largely from the Asian crisis, which caused difficulties in sales of the two prestige watch brands. (Before moving into the fold of Hour Glass, the two enterprises were managed for many years by their creators, Gerald Genta and Daniel Roth, who are both master watchmakers in the domain of the prestige mechanical timepiece.)
Unfortunately, however, risky strategic choices detracted from the two brands potential for recovery.
The rapidly rising Bulgari continues to join the other international brands that are doing quite well. In fact, the Italian brand sold 140,000 watches in 1999, hour Glass sold its two Swiss gems (whose joint turnover was CHF 20 million) and their partner, the Manufacture de haute Horlogerie, to Bulgari for CHF 37,6 million (US$ 23 million). In addition, Hour Glass will receive 33% of the “cumulative profit” for a period of seven years, including a minimum guarantee of CHF 4,5 million.
This acquisition, besides the need to invest considerable effort and sums to restore the reputation of the two names, will allow Bulgari a wrist hold in the sacred site of prestige watchmaking, the VallÉe de Joux , where the two brands are located. It will also permit the Italian brand an opening in the niche market of complicated timekeepers, which is seen as a strategic addition to its current activities.