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 September 10

by Carolina

Breitling watches are displayed in Basel, Switzerland, March 22, 2017. REUTERS/Arnd Wiegmann

MILAN, Sept 10 (Reuters Breakingviews) – Hollywood stardust is giving Breitling some financial sparkle. The Swiss maker of aviator timepieces touted by celebrities like Brad Pitt, Charlize Theron and Adam Driver has nearly doubled its sales on CVC’s four-year watch. The buyout firm is now considering flogging a 20% stake. Breitling’s luxury label and A-list promoters put a 3 billion Swiss franc valuation in reach.

CVC-backed Chief Executive Georges Kern has done a good job. Breitling was barely keeping time in 2017 when CVC took it over in a deal valuing it at around 800 million Swiss francs. Kern simplified its range of products, expanded its retail network and rejuvenated its manly image to appeal to women and youngsters. He was rewarded with sales climbing from 400 million Swiss francs to 700 million Swiss francs, producing about 175 million Swiss francs of EBITDA in the last 12 months, industry insiders told Breakingviews.

The stake sale is timely given the wave of investor interest in high-end chronometers. Swiss luxury watch marketplace Chronext hopes to raise 250 million Swiss francs from a stock market listing in the next few months. Unlike their mass-market counterparts, bling watchmakers don’t have to worry about competition from smart wrist devices like the Apple Watch or Fitbit. Buyout firms, including serial luxury enthusiasts like Carlyle (CG.O) and Permira, might jump at the opportunity.

With that in mind, Breitling is likely to be expensive. A post-Covid rebound has pushed luxury stocks to all-time highs, lifting valuations. Assuming a multiple at the midpoint of bellwethers Moncler (MONC.MI) and Prada (1913.HK), the Swiss brand would be worth 17 times its EBITDA, giving it a price tag of about 3 billion Swiss francs, including debt. That’s nearly four times what CVC paid.

Buyers of a minority stake may see that as steep, given their lack of control. Yet Breitling’s Pitt-powered sales are growing at 10% a year, the insiders say, putting revenue on track for 1 billion Swiss francs in 2025, when it too could be ready for a listing. Its positive cash flows also mean CVC is under no immediate pressure to sell. Breitling suitors may have to accept a celebrity valuation.

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– CVC Capital Partners is considering the sale of a minority stake in Swiss luxury watchmaker Breitling, Bloomberg reported on Sept. 3. The stake could amount to 20% of the company, industry sources told Breakingviews.

– CVC bought 80% of Breitling in 2017. The deal valued the independent Swiss brand, founded in 1884, at around 800 million Swiss francs at the time, according to a person familiar with the deal. CVC acquired a further 20% in 2018.

– Swiss online luxury watch marketplace Chronext said on Sept. 10 that it hoped to raise 250 million Swiss francs via a listing of its shares on the domestic stock market.

Editing by Ed Cropley and Oliver Taslic

Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Original posted at www.reuters.com

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