Following months of negotiations,
The purchase price of US$85 million includes US$20 million in the form of additional working capital. Aber will have the right to buy the remaining 49% in six years’ time at fair market value. Founded in 1932, Harry Winston is a prestigious diamond jeweler and one of a handful of American luxury good brands. The Harry Winston brand name is synonymous with some of the world’s most famous gemstones and jewelry, and is best known for donating the world-famous Hope diamond to the Smithsonian Institution in Washington, D.C.
Known as the “jeweler to the stars” and the “king of diamonds,” the house of Harry Winston has gained notoriety for providing large diamonds to movie stars for select, well-publicized events, such as the Academy Awards.
Headquartered on Fifth Avenue in New York, N.Y., the company maintains six flagship retail salons around the world, including New York City, Beverly Hills, Paris, Geneva, Tokyo and Osaka, and new salons will open in Las Vegas and Taiwan this year. The company’s collection of necklaces, bracelets, earrings, rings, and wrist watches are primarily crafted and designed in-house using high-end, quality gem stones and retailed through salons by personal appointment. The company’s line of timepieces is distributed internationally through exclusive relationships with jewelers in the Middle East, Asia, Europe and the U.S. Company sales for 2003 totalled about $130 million.
The deal directly exposes Aber to the U.S. retail market, which accounts for more than half of global diamond jewelry sales, while offering potential branding initiatives. “This investment in Harry Winston is the next step in realizing our objective of building value in a diamond business that exploits synergies between the two bookends of the diamond pipeline — mining and retailing,” states Aber Presient Robert Gannicott.
He adds: “The diamond jeweler brings a much broader audience that understands the name Harry Winston than understands Aber. It exposes us to a completely new range of analysts in the luxury goods field.”
Aber owns a 40% interest in the Diavik diamond mine in the Northwest Territories and markets its share of diamond production independently of
“In contrast to a mining project, with revenues dependent on a depleting resource, a business such as Harry Winston has potentially infinite life and therefore strong residual value,” Gannicott says.
Harry Winston is a family-run enterprise, operated in partnership with Fenway Partners, a New York-based private investment firm. Fenway purchased 55% of Harry Winston in December 2000 in a transaction valued at more than US$100 million. “Aber’s investment enables us to realize an attractive partial return on our investment, while retaining an ongoing interest in Harry Winston’s promising future,” states Fenway Chairman Peter Lamm.
In conjunction with Aber’s investment, Harry Winston has arranged a new credit facility of US$60 million with a consortium of banks lead by ABN Amro Bank N.V.
“This is a great day in the 70-year history of Harry Winston,” remarks Ronald Winston, the company’s chairman. “Aber’s investment in our company and the relationships it brings will allow us to expand into new markets and introduce new product offerings. It fulfills my father’s dreams of creating a company that extends from the mine to the finished jewel.”
“A diamond jeweler is dependent on supply lines, and one of the reasons a lot of the luxury goods companies have not diversified into diamond jewelry is because of the complexity of diamonds as a product,” says Gannicott. “This [jewelry] industry wishes to have reliable sources of mine supply, which we can provide.”
In the meantime, Rio Tinto’s wholly owned subsidiary, Diavik Diamond Mines, has downgraded its 2004 production forecast. Delineation drilling of the A-154 South kimberlite pipe has identified a shell of low-grade kimberlite mud material surrounding the orebody; it persists to 80 metres of depth in the open pit. The diamond content of the kimberlite mud is little-understood, but its dilutive effect is expected to affect production, and on that basis, the Diavik mine is expected to produce in the mid-to-upper range of 7-8 million carats for the year, compared with an earlier estimate of 8.2 million carats. This past winter, mine dilution has been affected somewhat by the occurrence of ice on the floor of the pit bottom. The slabs of ice are being mined together with the kimberlite ore and fed through the mill, where much of it dissolves in the rotary scrubber circuit.
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