China Haidian may buy more watchmakers after Corum

ZURICH Fri Apr 26, 2013 10:10am EDT

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ZURICH (Reuters) - China Haidian Holdings (0256.HK) may not stop at this week's acquisition of Swiss watchmaker Corum as it seeks a foothold in high-end timepieces popular with Chinese consumers.

Chinese appetite for Swiss luxury watches has exploded in recent years, boosting sales at industry leaders Swatch Group (UHR.VX) and Richemont (CFR.VX).

But growth, particularly in top-end watches, has ground to a halt as the Chinese economy loses steam and a crackdown on giving expensive gifts as favours hurts demand.

China Haidian, which bought Swiss watch brand Eterna in 2011, said on Wednesday it was acquiring Corum Watches for 86 million Swiss francs ($90.8 million) to develop its Swiss brand portfolio and attract more Chinese customers.

"We may consider additional acquisitions in the future to grow our business if an opportunity arises," Hon Kwok Lung, chairman of China Haidian, said on Friday in written answers to questions from Reuters.

He said no purchases were planned for now.

Hon said China Haidian wanted to use its retail network in China to help distribute and market Corum watches in China, as it did with Eterna.

Eterna has said its revenue grew in 2012, but product and market development costs brought it a net loss of HK$69.28 million. It expects Eterna to break even in a couple of years.

ZKB analyst Patrik Schwendimann said he believed neither Swatch Group nor Richemont had been interested in Corum. Even if the Chinese gained some know-how thanks to the purchase, they were still far from becoming serious competitors at the top end of the watch market.

"I don't see a danger for Richemont and Swatch Group: the Corum and Eterna brands are way too weak," he said.

But Vontobel analyst Rene Weber said the Corum acquisition made sense for China Haidian as Corum needed to find alternative suppliers of watch movements - the internal mechanisms of watches - and Eterna makes its own.

"The price of 86 million francs does not seem very high in the light of my sales estimate of 150 million francs for about 17,000 watches. It shows (Corum was) very dependent on suppliers," he said.

Some smaller independent watchmakers have come under pressure since Swatch Group, which used to supply the entire industry with watch movements and parts, began cutting back deliveries last year.

Hon said he planned to keep the Corum and Eterna operations separate, as it does with its Rossini and EBOHR brands in China.

(Editing by Tom Pfeiffer)

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