LVMH’S ACQUISITION OF ZENITH EXPANDS WATCH, JEWELRY GROUP
Byline: Katherine Weisman
PARIS — LVMH is quickly building a watch and jewelry power base.
In the last two months, LVMH has made three major acquisitions — Tag Heuer, Ebel and Chaumet — to create a full-fledged watch and jewelry group. On Monday, the group topped off those buys with the purchase of the Zenith watch and movements manufacturer, providing the group with much-needed production capacity.
At the same time, LVMH tied the acquisitions to the creation of a Watch & Jewelry division to be headed by Christian Viros, formerly president and chief executive officer of Tag Heuer.
In a separate development, LVMH Moet Hennessy Louis Vuitton announced it had acquired U.K. auction house Phillips Auctioneers, the 203-year-old auction house that ranks a distant third behind Christies and Sotheby’s. Phillips complements Arnault’s online auction investments via Europ@Web, which include the U.K.’s i-collector and France’s Aucland.
The new Watch & Jewelry division, with sales nearing $670 million at current exchange rates, becomes the fifth operating group at LVMH, complementing the existing Fashion & Leather Goods, Wines & Spirits, Fragrances & Cosmetics and Selective Retailing. In addition to Tag Heuer, the Ebel watch brand and the Chaumet jewelry house, snapped up last month from Investcorp, the new group includes Fred Joaillier and the Benedom designer watch business.
LVMH is acquiring Zenith from its owner, Paul Costella. It provides LVMH with a highly profitable movement production firm to complement its brands. Zenith produces precision mechanical movements for clients, including Rolex and Concord.
Founded in 1865, Zenith makes about 50,000 timepieces a year and is known for its El Primero integrated automatic chronograph movement and the Elite mechanical movement. The company has sales of about $38.7 million. While LVMH would not disclose terms of the deal, it is believed that LVMH paid about $48.4 million for the company.
“The acquisition of Zenith reinforces the strong market presence that we have built up in this sector with Tag Heuer, Ebel, Chaumet, Fred and Christian Dior watches,” LVMH group managing director Myron Ullman said in a statement. “The addition of the new division completes our organizational structure, enabling the group to cover all sectors of luxury goods and strengthen our position as leader.”
Also on Monday, LVMH Specialty Retail Concepts of San Francisco, a division created for retail development, confirmed it was opening its first Synchrony store, featuring an assortment of fashion and bridge watches. The store is set to open Thursday at the Glendale Galleria in Los Angeles. The company said more stores are expected to open in 2000.
The move to buy Phillips brings LVMH into new territory. One hundred percent of Phillips was purchased via LVMH’s development capital arm, LV Capital. Terms of the deal were undisclosed, but sources believe LV Capital paid roughly $112.9 million for the London company, which will post sales of $225.8 million this year, which are direct sales exclusive of commissions. Prior to the LVMH purchase, Phillips was 60 percent owned by 3i, a British investment firm, and 40 percent owned by individual shareholders.
“Phillips is the third-largest auction house in the world, and with that rank, there is plenty of room for growth in face of the competition,” LV Capital president Daniel Piette told WWD.
LV Capital was created last spring with the goal of investing in innovative and creative companies and earning a return of investment of about 20 percent, explained Piette. So far, LV Capital has made more than $300 million in investments, including the Phillips purchase.