Thursday, February 11, 2010

HWD: Sell the Family Jewels

By Eric Jackson
RealMoney Contributor

2/11/2010 9:55 AM EST
Click here for more stories by Eric Jackson

Harry Winston Diamonds (HWD - commentary - Trade Now) conjures up visions of the fabulously expensive jewelry stores in New York and Beverly Hills famous for draping Hollywood starlets in diamonds and pearls for the Academy Awards. But if you think the stock is a smaller version of Tiffany (TIF - commentary - Trade Now), you're way off. Harry Winston is one of the most unusual (and perhaps nonsensical) business combinations you'll find. And while the time of year might prompt you to go out and get something sparkly for your loved one, you might want to hock this particular gem.

The company is a combination of two old businesses, brought together because of a family feud. The Harry Winston retail diamond business passed into the hands of Harry's sons, Ron and Bruce, when he died in 1978. The two soon became involved in a long-running legal battle over ownership. Bruce, who'd initially shown no interest in the family trade, objected to the way Ron ran the business, not least the amount Ron started paying himself. Suits and countersuits were filed. Ron made several buyout attempts of Bruce's stake, but to no avail.

Finally, in 2000, private equity firm Fenway Partners bought out Bruce's stake in the business for $44 million. Three years later, Fenway decided to cash out and sold its stake to Aber Diamond Corp. of Canada, along with an option to buy the entire company. Aber completed the full takeover of Harry Winston in 2006 and took on the name, changing its own ticker to HWD.

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