Mar 29, 2010
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Swatch CEO says no bid talks with Bulgari

Mar 29, 2010

ZURICH/PARIS, March 29 (Reuters) - Swatch Group (UHR.VX) and Bulgari (BULG.MI) moved swiftly to quash speculation the Swiss group was eying the Italian jeweller, after the head of Swatch suggested in a German press report a deal could be afoot.

Bulgari shares rose as much as 5 percent on Monday 29 March after Swatch Group chief executive Nick Hayek told the German magazine Focus he regarded the Italian jeweller as a potential big brand that could be developed.

Bulgari shares were up 3.08 percent by 1214 GMT after the two companies denied a tie-up was in the works. Swatch Group shares were down 0.9 percent at 340.1 Swiss francs.

"The Swatch Group has not expressed any desire to acquire Bulgari, and Bulgari has not expressed either the desire to be bought by Swatch Group," Hayek told Reuters in a telephone interview on Monday 29 March.

"There are no negotiations in front of, or behind the curtains," he said.

Analysts said the deal would make sense for Swatch which has only a small presence in jewellery but it would also mean it would have to take on a debt of about 1 billion euros ($1.34 billion) to finance it, which would be an unpalatable prospect for the Swiss group.

"Strategically a deal with Bulgari would makes sense for Swatch Group," said Jon Cox, analyst at Kepler.

But he added: "The company has been reluctant to take on debt in the past although such a move would leave its net debt/EBITDA (earnings before interest, tax, depreciation and amortisation) somewhere around 1 time."

Also, the Bulgari family, which still owns 51 percent of the company, is not willing to sell.

"The Bulgari family is not interested in selling," Bulgari said in a statement on Monday 29 March.

But Hayek's comments cemented the view that mergers and acquisitions, which have been few and far between over the past two years due the downturn, could be back, buoyed by recovery prospects.

Bulgari shares have gained about 80 percent over the past 12 months after hitting a low of 3.14 euros in April last year.

The company has a market capitalisation of 2.4 billion euros. Comparatively, Swatch Group, which has an estimated 1 billion euros in disposable cash, is worth 17.5 billion euros.

Earlier this month, Bulgari posted a bigger than expected fourth-quarter loss together with performance figures that made it look weak compared to sector peers, analysts said.

"Every time an interesting and big company has difficulties, one thinks of us," Hayek said in the interview. "I think there are brands that need more the Swatch Group than the Swatch Group needs them." (Reporting by Silke Koltrowitz and Katie Reid in Zurich and Astrid Wendlandt in Paris; Editing by Sharon Lindores) ($1=1.071 Swiss Franc)

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