Buyout firms jostle for John Hardy in jewellery M&A boom

Fri Nov 29, 2013 8:28am EST

* Bali-inspired jeweller seen fetching $100-$140 mln

* Catterton, TSG among the interested parties - sources

* Jewellery outpacing broader luxury market growth

By Astrid Wendlandt and Olivia Oran

PARIS/NEW YORK, Nov 29 (Reuters) - Jeweller John Hardy is attracting bid interest from a string of U.S. private equity firms, sources close to the matter said, the latest potential deal in a sector outpacing the broader luxury industry thanks in part to financially independent Asian women.

U.S. buyout groups Catterton Partners and TSG Consumer Partners are among the firms interested in a jeweller which draws its inspiration from the Indonesian island of Bali and sells products including a $425 two-finger silver snake ring and a $1,495 silver-and-gold dragon ring, the sources said.

While luxury watchmakers are struggling with a crackdown in China on gift-giving to officials and several fashion and accessories brands point to slowing growth in a range of emerging markets, jewellers are proving more resilient.

A sector once dominated by events such as engagements and births, is now achieving a broader appeal, due partly to the growing financial independence of women in emerging markets, particularly Asia, and to ageing populations in mature markets. Older people tend to spend more on jewellery than the young.

"Jewellery is the next big category behind shoes as it is easy to wear, allows you to show your personality and is not hugely expensive," said Elsa Berry, managing director of Vendome Global Partners, a financial advisory firm focused on the luxury industry, in New York.

Bernstein analysts forecast that sales of branded jewellery, which makes up 20 percent of the total market, will grow at a compound annual rate of 8-9 percent from 2012-17, compared with 6-7 percent growth for the luxury industry as a whole.

That has driven a pick up in acquisitions of jewellers, with recent deals including Swatch's $750 million purchase of Harry Winston and Gucci-owner Kering's acquisition of a majority stake in China's Qeelin and Italy's Pomellato.

Private equity firm 3i, which owns 23 percent of John Hardy, is keen to sell the jeweller as part of a general winding down of its Asian operations. It is also looking to get back a $45 million redeemable loan to John Hardy that matures in October, the sources told Reuters on condition of anonymity.

John Hardy's enterprise value could range between $100 million and $140 million, one source said.

Chief Executive Damien Dernoncourt, who took the business private in 2007 with backing from 3i, controls it through a holding that includes other investors and creative director Guy Bedarida and owns 73 percent, the sources said.

3i declined to comment. No one at John Hardy was immediately available for comment.

TRADITIONAL TECHNIQUES

Catterton owns a stake in French high-end crystal maker Baccarat, while TSG has invested in jewellery brand Alexis Bittar, a close rival of John Hardy with which it could generate cost savings.

Other private equity firms interested in John Hardy include TA Associates, which invested in French fashion brand Zadig & Voltaire, and JH Partners, which recently ceded control of underwear brand La Perla, the sources said.

Nobody at Catterton, TSG, JH Partners or TA Associates was available for comment on Thursday, a holiday in the United States to mark Thanksgiving.

John Hardy, a rival of jewellers in the United States such as David Yurman, was founded in Bali in 1989 by a young Canadian art student of the same name who was studying the region's traditional jewellery making techniques.

Today, the brand's products are still designed in Bali, but the company is headquartered in Hong Kong.

A separate source said Kering and luxury industry leader LVMH, which owns Roman jeweller Bulgari, would not be interested in bidding for John Hardy as the brand was in the more widely accessible segment of the market, an area in which the two groups were not looking to invest.

LVMH and Kering declined to comment.

The New York office of investment bank Rothschild handling the sale sent out a teaser to potential bidders two weeks ago in which it reported John Hardy made earnings before interest, tax, depreciation and amortisation (EBITDA) of $13 million on sales of $75 million in the 12 months to July 30, the sources said.

For the current year to July, the firm is aiming for EBITDA of $15 million on sales of $86 million, the sources added.

About 90 percent of John Hardy's revenue is generated in the United States, Canada and the Caribbean, they said.

The United States is the biggest jewellery market in the world, according to analysts from brokerage Vontobel, with a 29 percent share of the global market, followed by China with 11 percent and India with 10 percent.

An official deadline for indicative offers has not yet been set, the sources said.

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