Cortina Holdings plans to pay $84.5 million in cash for 18 boutiques now run by fellow luxury watch retailer Sincere Watch.
Besides the Sincere Watch chain of multi-brand retail outlets in Singapore and Malaysia, the target company also runs a similar business in Thailand under the Pendulum brand.
These boutiques carry brands such as A. Lange & Söhne, Audemars Piguet, Franck Muller, IWC, Jaeger-LeCoultre, Panerai, Omega, Vacheron Constatin and Tudor.
In addition, the target company operates mono-brand boutiques for Franck Muller in Singapore and Australia; A. Lange & Söhne in Malaysia; and A. Lange & Söhne, Breitling and IWC in Thailand.
The seller is Hong Kong businesswoman Pollyanna Chu Yuet Wah, who bought the business in 2012. Sincere Watch, according to its website, now runs more than 30 boutiques across the region in markets including Hong Kong, China, and South Korea.
In an SGX announcement at 12.04 am on Nov 17, deputy chairman and deputy CEO Raymond Lim explains that the acquisition will give the company exclusive distributorship rights to the Frank Muller brand in 12 countries within Asia Pacific.
See:Cortina Holdings posts 23% lower 1H earnings of $14.6 mil due to Covid-19
The deal will also give Cortina access to the target group’s brands that can be distributed across 40 combined outlets and create operational synergies that will increase Cortina’s value to both consumers and business partners.
The proposed purchase price of $84.5 million is slightly below the $85.9 net tangible asset value of the target group as at March 31 2020.
Cortina plans to fund 60% of this acquisition through bank loans and the remainder via internal resources.
As at Sept 30, Cortina held a cash balance of $122.3 million, up from $114.4 million as at March 30 2020.
As part of the deal, the parties will carry out a stock-taking and reconciliation exercise of the inventory involving their respective professional advisors and consultants.
Under terms of the deal, the vendor will help seek the go-ahead from “certain” brand owners and landlords for the deal.
For FY2020 ended March 30, the target company incurred a net loss of $6,383,000. In contrast, Cortina recorded earnings of $39.3 million in the same period, up 36% y-o-y.
For the most recent half-year ended Sept 30, Cortina reported earnings of $14.6 million, down 23% y-o-y. Revenue in the same period was down 32% y-o-y to $173.8 million.
Cortina was founded in 1972 by chairman and CEO Anthony Lim. Sincere Watch, meanwhile, was founded by Tay Boo Jiang back in 1954.
Cortina shares closed at $2.07 on Nov 16, up 1.47% for the day and up 31.8% year to date.