Chow Tai Fook buys US diamond business Hearts on Fire for US$150m

Top jeweller pays US$150m for US label Hearts On Fire, with shares surging on deal

PUBLISHED : Thursday, 19 June, 2014, 12:55am
UPDATED : Monday, 23 June, 2014, 9:42pm

Jeweller Chow Tai Fook is buying US luxury diamond company Hearts On Fire for US$150 million with the aim of expanding the group's product mix.

It also plans to bring the US brand to Hong Kong and the mainland by March next year.

Chow Tai Fook shares surged 5.81 per cent after the announcement to end at HK$11.60 yesterday.

The 100 per cent acquisition is funded by internal cash reserves and is the firm's first since it raised US$2 billion in a Hong Kong initial public offering in 2011.

Management said on a conference call yesterday that it planned to complete the acquisition by the end of September and open a store in Hong Kong and in Shanghai six months after that.

"The proposed acquisition is in line with the group's strategies to optimise product mix and efforts to promote higher-value products to match the spending profiles of consumers and to encourage repeat customer purchase," chairman Henry Cheng Kar-shun said yesterday.

Hearts On Fire had audited net sales of US$104.8 million last year, up 5.5 per cent from US$99.3 million in 2012. The company did not disclose earnings, but it is understood the business is profitable, CLSA head of consumer research Aaron Fischer wrote in a note.

Three-quarters of the company's sales come from products in the US$1,000 to US$10,000 range, with the rest from more expensive items.

Managing director Kent Wong Siu-kee said Chow Tai Fook management was constantly looking at acquisition opportunities but was not in a rush.

Owned by tycoon Cheng Yu-tung, Chow Tai Fook is the world's largest jewellery company with a market capitalisation of US$14 billion.

Founded in 1996 by Glenn and Susan Rothman, Hearts on Fire has a retail-partner network in 31 countries.