Watches of Switzerland explores potential take-private interest amid London market pressure

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Watches of Switzerland take-private talks

Highlights

Watches of Switzerland engaged in preliminary takeover discussions, seeking offers significantly above £7.50 per share amid perceived stock market undervaluation.
Shares have risen 55% year-to-date to about £7.20, boosted by strong U.S. stock market and luxury watch demand, despite margin pressure from higher gold prices.
Stock price remains less than half its 2022 peak despite rebound, with uncertainties from slowing European luxury sales and potential impact from Rolex's acquisition of Bucherer.

Take-private discussions and valuation stance

As first reported by Reuters, the FTSE 250 retailer has engaged in discussions over potential takeover approaches in recent months, citing three people close to the matter. Two of those people say Chief Executive Brian Duffy responded to the initial approaches because he believes the stock market undervalues the company, while one adds that no formal offer has been made.

A third source says the company is seeking an offer of significantly more than £7.50 per share. Watches of Switzerland says it does not comment on rumours or speculation, and Rolex does not respond to a request for comment.

Luxury demand supports shares despite sector headwinds

Investor interest comes as shares in Watches of Switzerland have rallied 55% this year to about £7.20, supported by strong demand for high-end watches from brands such as Rolex and Cartier. The group, whose sales are split roughly evenly between the UK and the U.S., also gives an upbeat outlook in May, helped by U.S. stock market strength, although higher gold prices are squeezing margins.

Even with the rebound, the shares remain at less than half their 2022 peak, according to LSEG data, reflecting a slowdown in European luxury sales in recent years. The stock also falls sharply in 2023 after Rolex acquires Swiss retailer Bucherer, a move some analysts view as a potential threat to Rolex’s relationship with Watches of Switzerland.

The UK’s largest luxury watch retailer, founded in 2007, is due to publish full-year results on Tuesday. Any private sale would add to this year’s shift of companies away from the London Stock Exchange following a wave of foreign takeovers.

Our earlier report on the weak UK IPO market and accelerating overseas takeovers explained how subdued valuations are drawing foreign bidders to London-listed companies even as new listings remain scarce. It highlighted a growing imbalance between limited fundraising via IPOs and a surge in cross-border dealmaking, with competition among buyers pushing offer prices higher in some cases. The piece also noted that this backdrop is adding pressure for market reforms to make London more attractive for public companies.

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