Kering fuels its watchmaking ambitions

The number of independent watch manufacturers is dwindling fast, particularly among those which, by dint of their size, struggle to keep pace with the industry’s giants. In other words, more eggs are finding themselves in fewer baskets, as the recent takeover of Ulysse Nardin by Kering (formerly PPR) shows. The French multinational announced its latest acquisition at end July when it published its half-year figures. With sales estimated by Banque Vontobel at CHF 230 million and annual production in the region of 25,000 watches, Ulysse Nardin sits just below the likes of Rolex, Patek Philippe, Audemars Piguet or Chopard, companies for which independence goes hand-in-hand with a strong market presence.

After Corum, which last year switched to Chinese interests, now it’s Ulysse Nardin’s turn to change hands. Established in 1846, the company was taken over by Rolf Schnyder in 1983, an entrepreneur who successfully positioned the brand, not least thanks to early investment in production and next-generation technologies: Ulysse Nardin was one of the very first watchmakers to master silicon, used to manufacture parts for the regulating organ, for example. When Rolf Schnyder died suddenly in 2011, Ulysse Nardin was bereft of its soul and mentor. Mr Schnyder had put his shares in a foundation as a means to ensure the company’s longevity and independence. Clearly this wasn’t enough: other options had to be taken into consideration, and last spring the first persistent rumours were heard as to a possible takeover.

A reasonable price

That Kering should be the one to acquire the brand comes as no surprise: the group has never been coy about its intentions to bolster its watch and jewellery business. Indeed, a newly created Luxury – Watches and Jewellery Division has been placed under the stewardship of Albert Bensoussan. Previously with LVMH, he spearheaded Louis Vuitton’s expansion into Fine Watchmaking. Until now, Kering had concentrated on reinforcing its presence in jewellery, with the takeover these past two years of Pomellato, Dodo and Qeelin, which come alongside Boucheron. Kering’s first steps in watchmaking go back to 2011 when it acquired Sowind, which presides over the Girard-Perregaux and JeanRichard brands. Michele Sofisti was appointed to oversee restructuring within the entity. Mission accomplished, so it would seem, as this coming November Mr Sofisti will reprise his duties at the head of Gucci Timepieces (Gucci, one of Kering’s flagship luxury brands, posted disappointing first-half results with revenue dropping almost 5%).

The group, chaired by François-Henri Pinault, was nonetheless far from satisfied with its presence in the watch segment and entered into talks to acquire Richard Mille, although negotiations were cut short in summer 2013 at an advanced stage. Following Kering’s successful bid for Ulysse Nardin, it was announced that Chai Schnyder and Patrick Hoffmann would remain in place as Chairwoman and CEO respectively. The company, which is headquartered in Le Locle, in the Swiss canton of Neuchâtel, will benefit from much greater exposure in its new owner’s hands. Knowing that communication and marketing spend must equal 10% of sales, at a conservative estimate, to position a brand solidly on international markets, Ulysse Nardin has found the means to grow. Kering will also be looking to secure a return on the takeover, which it paid thirteen times operating profit. This is, say analysts, a perfectly reasonable price in view of the brand’s manufacturing independence and its aura among fans.