NEW YORK — Tourneau Inc. is changing hands.
WWD has learned the New York-based watch retailer, one of the largest in the world, has entered into an agreement to be acquired for more than $300 million by an investor group led by Green Equity Investors IV L.P., an affiliate of Leonard Green & Partners L.P. The investors also include members of the Wexler family, who have owned the chain since the Seventies, and of the senior management team, who will have minority stakes in the firm.
The transaction is expected to be announced today and to be finalized in October.
Under the agreement, Robert J. Wexler, Tourneau’s chief executive officer, will become chairman. Howard R. Levitt, the current president, will take on the additional role of ceo. The remainder of Tourneau’s management team will stay the same.
Leonard Green & Partners, whose portfolio of companies in which it holds a stake includes Neiman Marcus Group, The Sports Authority, FTD Group and the Rite Aid Corp., declined to comment on the investment. The Los Angeles-based private equity firm is one of the largest in Southern California, managing some $3.7 billion of private equity capital.
“A lot of things came together to make this deal happen,” Levitt said in an exclusive interview, adding Tourneau has been actively exploring a partnership for about a year now. “Tourneau has been a closely held family business since its inception. It has been doing very well over the last few years and it’s the logical time right now to make a change. Although Tourneau has more than adequate capital resources in and of itself, it’s a chance for the existing shareholders to take some of their investment off the table, while still maintaining a significant interest in the business.”
Tourneau, which was established in 1900 and sells timepieces by brands such as Cartier, Tag Heuer, Omega, Rolex and Patek Philippe, as well as its own eponymous brand, is in the midst of an aggressive expansion. Andrew Block, Tourneau’s vice president, said the strategy for growth will remain on course following the closing of the deal, with expectations for net sales in excess of $300 million for the fiscal year ending Jan. 31.
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“One of the key reasons Leonard Green was selected was because of their hands-off management style,” said Block. “The intent is to allow the management team to continue to operate in the same style they have operated in the past, without a lot of intervention.”
This year, Tourneau opened seven new doors in the U.S., including the massive 17,000-square-foot Tourneau Time Dome in February in the Forum Shops at Caesars Palace in Las Vegas and its newest space at the Pier at Caesars in Atlantic City, N.J. The company now has 33 boutiques in the U.S., and anticipates opening at least another five stores per year over the next five years, according to Levitt.
In addition, Tourneau announced in April that it had entered into a retail partnership with The Swatch Group, the Biel, Switzerland-based manufacturer of timepiece brands such as Swatch, Hamilton, Omega and Rado, to open watch stores in premium outlet malls across the U.S. Although no leases have been signed, Tourneau and Swatch are in discussions for some 20 stores and anticipate opening at least one of those locations by the end of the year. Targeted areas are major luxury outlet malls outside of New York, Los Angeles, Las Vegas and Orlando, Fla.
Tourneau also has outlined international plans. It said this spring that it had inked a deal with Peace Mark (Holdings) Ltd. and International Watch Group to form a joint venture company called Peace Mark Tourneau (Holdings) Ltd. that would expand the Tourneau watch franchise to Asia. The new company has already opened two stores in Asia, including a 10,000-square-foot Tourneau flagship in Shanghai. Thirty additional locations are expected to bow in places including China, Macau and Taiwan within the next five years.
“Tourneau has followed a path that it’s been following for four or five years now,” said Levitt. “I would say the personality of the business and the way the business is run are going to remain the same.”
The luxury watch sector has seen steady increases over recent years. In February, the Federation of the Swiss Watch Industry said the value of Swiss watch exports in 2005 increased 10.9 percent to a record 12.3 billion Swiss francs, or $9.5 billion. The U.S., which experienced a 4.5 percent increase in watch sales, came out as the top destination for Swiss watches, consuming 2.1 billion Swiss francs, or $1.62 billion, worth of timepieces. Other key markets for growth included China and Thailand. Growth is expected to continue in the category, with most industry experts predicting at least single-digit percentage gains.