Think of ABER DIAMOND CORP. and you think of the hard work that went into developing Canada's second diamond mine in the Arctic. The company's share of the Diavik mine is becoming a great successcreating not only some of the world's loveliest gem stones but a considerable cash flow as well. Think of HARRY WINSTON and you think of a world-famous creator of expensive jewelry. Aber thinks it might be a good place to invest some of its cash, not in necklaces but in the Harry Winston franchise itself. On Nov. 27 the mining company announced it has entered into negotiations that will eventually give it majority control of the retailer and an outlet for its diamonds.
The House of Harry Winston bills itself as the "King of Diamonds", boasting of unparalleled quality, exquisite design and fine craftsmanship. At one time, the legendary jeweler owned the infamous Hope diamond. It routinely loans multi-million-dollar adornments to Hollywood stars for such events as the Academy Awards. There is almost an overload of romance and glamour associated with the firm.
Harry Winston established the business that bears his name on New York City's toney Fifth Avenue in 1932. It has outlets in Beverly Hills, Paris, Geneva and Japan. It is owned in part by a private equity firm, Fenway Partners. That stake reportedly cost them US$55 million in 2000.
Aber, on the other hand, is a simple (albeit very successful) Canadian mining company that has been around less than 10 years. It holds 40% of DIAVIK DIAMOND MINES; the other 60% is held by a subsidiary of RIO TINTO. Aber is cash-rich having working capital of $83 million at the end of January 2003 and total assets of $781.6 million. Interesting, too, is that TIFFANY & CO is the largest Aber shareholder, with about 14.6% of the shares. That gives Aber an outlet for at least $50-million-worth of its diamond production. But long-term, Aber wants its own outlet.
By buying into Harry Winston, Aber acquires the famous name and lofty standing of one of the world's leading jewelers. If Aber set out to create the same status with a new retailer, it could not hope to reach the pinnacle represented by Winston in our lifetimes. Its offer is a bold step forward for a company that is all business.
The deal is not a certainty. There are regulatory hurdles to be cleared, due diligence to be done, and an undisclosed price to be agreed upon. The timetable for a staged transaction is also undecided. Given the considerable skills of Aber's management, I would be surprised if they couldn't work out the deal. The producer is well on its way to becoming a major global retailer of a very desirable commoditythe Canadian diamond.
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