PARIS — While speculation had been circulating for some time, it’s now official and the high-end watch market has one less independent player.
Breitling, one of the few remaining family-owned Swiss watch brands, has been snapped up by CVC Capital Partners, which is to acquire an 80 percent stake in the watchmaker.
Financial terms of the deal, realized through CVC’s Fund VI, were not disclosed, although analysts estimate the acquisition values the business at more than 800 million euros, or $871.5 million at current exchange, and that the multiple paid was around two times the company’s sales.
As part of the transaction, Breitling owner Théodore Schneider will reinvest for a 20 percent shareholding, CVC stated.
But while the deal is a hefty one, it is unclear whether CVC’s investment in Breitling will spur a wave of similar purchases throughout the close-knit Swiss watch industry.
Potential acquirers for Breitling, which has estimated annual sales of between 500 million and 0ne billion Swiss francs, or between $500 million and $1 billion at current exchange, had been pitted by analysts as “soft luxury” players Kering and LVMH Moët Hennessy Louis Vuitton, supposedly intent on bolstering their portfolios in the segment.
At the Baselworld watch and jewelry show last month, speculation abounded that a tie-up between Breitling and Rolex’s sister brand Tudor could be in the works after the two companies revealed they would be exchanging movements.
But after two years of declining sales for Swiss timepieces in international markets, hit by the crackdown on corruption in China, declining sales in Hong Kong — the number-one market for Swiss timepieces — and large inventories, the market remains difficult.
Over the past year, some of the leading players have been cutting costs, rationalizing their portfolios, introducing lower priced timepieces and even buying back surplus inventory, in the case of Compagnie Financière Richemont.
While the morose environment could be seen as making it tougher for the few independents still out there, making more consolidation likely, analysts are more equivocal.
“I think it means the leading players believe it is not a good time to buy watch brands, otherwise a [private-equity firm] wouldn’t have gotten the deal,” Luca Solca, sector head of luxury goods at Exane BNP Paribas, told WWD.
“We believe that this is marginally good for Kering as it reduces the risk of more M&A in hard luxury, where results have been disappointing,” wrote Solca in a research note.
“The deal shows that conditions are tough in the industry,” said Jon Cox, head of Swiss equities at broker Kepler Cheuvreux in Zurich.
“Breitling is a decent brand but a reported 2x sales multiple doesn’t look like a lot, and the fact that it was won by private equity and not luxury or Chinese distributors shows that the industry remains depressed,” he added. “I expect more independents to be taken over.”
Breitling is a relatively small player in the high-end watch segment. The firm is estimated to hold a 1.3 percent share of the market for new timepieces — its share rises to 2.7 percent in the market for second-hand watches.
The bulk of the segment is dominated by three companies — Swatch Group, Richemont and privately held Rolex. Together, they control 63 percent of the market for new products, according to Exane BNP Paribas.
Now that Breitling is off the market the only independent players apart from Rolex, which is owned by a foundation, in the top 15 luxury watch brands are Patek Philippe, Chopard and Audemars Piguet, none of which have visible “for sale” signs hanging over them. Smaller independent players include Richard Mille, which was reportedly in talks with Kering back in 2013 although a deal never materialized, and Parmigiani Fleurier.
CVC said it would use its network and expertise to build renown for Breitling, founded in 1884 and based in Grenchen, Switzerland. The company employs 900 people and operates two domestic manufacturing facilities.
“Specifically, we see significant growth potential for Breitling in both existing and new geographies by driving the digitization of the marketing and distribution channels in the company, helping to enrich the product and customer experience,” said Daniel Pindur, senior managing director at CVC.
“I am convinced CVC is the right partner to elevate Breitling to the next level,” Schneider said. “CVC’s expertise, track record and international network will help unlock Breitling’s full potential.”
Closing of the deal is subject to approval by relevant competition authorities and is expected in June.
CVC Capital Partners is a global private equity fund with current holdings in around 50 companies across diverse segments. Its retail and luxury holdings comprise Spanish company Cortefiel and German perfumery chain Douglas.