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Tiffany to pay Swatch over failed joint venture

Article By: ,  Financial Analyst
December 23, 2013 8:45 AM

Tiffany has been ordered to pay a large settlement to Swatch after a joint venture between the two companies fell through in 2007.

The firms had planned to start making watches together under the Tiffany brand, but the agreement collapsed after Swatch cancelled the deal.

Tiffany has now been ordered to pay $448 million (£274 million) to Swatch for its part in the failed joint venture, which has led the company to lower its financial outlook.

Despite this news, the share price of the jewellery specialist rose in after-hours trading by around 0.2 per cent today (December 23rd).

Tiffany reaction

"We were shocked and extremely disappointed with the decision of the majority of the arbitral panel," said Tiffany chief executive Michael Kowalski, in a statement.

He added that the findings of the panel are not supported by the facts of the case, or the various agreements between the Swatch parties and the Tiffany parties made in recent years.

"While we are reviewing our options with our legal counsel, I want to assure you that we do have sufficient financial resources to pay the full amount," said Mr Kowalski, who also noted the $300 million after-tax impact of the award will show up in the company's fourth quarter results.

The Tiffany chief executive also stressed that the settlement is not going to have an impact on the firm's "ability to realise our existing business plans in the short or long term".

Tiffany shares are currently trading at around 90.62, which is close to a new 52-week high for the company. The highest the share price of the firm has been in the last year is 91.51.

Stocks in the Swatch Group are also up today on the back of the announcement it will be receiving a major payout from Tiffany after the joint venture between the firms collapsed.

The company's shares are 0.43 per cent higher at 08:09 GMT, trading at 584.00 on the VTX stock exchange.

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