TIFFANY TAKES 45% STAKE IN LUXE CHAIN
Byline: Vicki M. Young
NEW YORK — Tiffany & Co. has agreed to purchase a 45 percent equity interest in Little Switzerland Inc. for $9 million through newly issued shares, subject to the signing of definitive agreements and customary closing conditions.
Under the terms of the deal, Little Switzerland, a specialty retailer with 17 luxury boutiques on five Caribbean islands and in Alaska, will issue new shares of stock in exchange for the $9 million, while Tiffany’s subsidiary companies will provide up to $2.5 million in debt financing. The specialty retailer, which sells brand name watches, jewelry, crystal and fragrances, trades on the over-the-counter bulletin board.
Michael J. Kowalski, Tiffany’s president and chief executive officer, said in a statement, “The Caribbean region is an exciting retail market. Little Switzerland already has a meaningful presence and we believe the travel industry holds further growth potential.
Janet Joseph Kloppenburg, equity analyst at Robertson Stephens, indicated in a research note that Tiffany will also take a seat on Little Switzerland’s board. “We believe this strategic investment represents a low-risk opportunity for Tiffany to explore the vacation travel market, which represents all of Little Switzerland’s business,” she wrote.
A Tiffany spokesman said that the retailer has made similar investments in the past. Last year, the company invested nearly $10 million in Della.com, which was later acquired by WeddingChannel.com. Two years ago, Tiffany made an investment in Aber Diamond Corp., a Canadian firm. “There is no specific acquisition or investment strategy,” he said. The spokesman added that the company continues to be focused on organic growth, building customer awareness of the entire Tiffany franchise through new stores.
Little Switzerland said it will use the proceeds from the transaction for working capital and to pay down some bank debt. The company also intends to refinance the balance of its indebtedness.
The specialty chain, Kloppenburg noted, had incurred operating losses for several years, but is undergoing a turnaround, showing greatly narrowed losses in the first half of fiscal 2001.
Robert Baumgardner, president and ceo of the specialty chain, said in a statement, “We are looking forward to having Tiffany as a strategic partner and believe that Tiffany will greatly assist Little Switzerland to grow and return to profitability.”