Cortina plans to acquire Sincere Watch for S$84.5m

MAINBOARD-LISTED luxury watch retailer Cortina Holdings has proposed to acquire privately-held Sincere Watch for S$84.5 million in cash, it said in an exchange filing early Tuesday morning.

Cortina shares traded at S$2.30 as at 10.07 am Tuesday, up S$0.23 or 11.1 per cent from the previous close, after the announcement.

Cortina said the proposed acquisition will provide it with exclusive distributorship rights to the Franck Muller brand in 12 countries within the Asia-Pacific.

It added that the deal will also give Cortina access to Sincere Watch's arsenal of brands that can be distributed across 40 combined outlets, and create operational synergies that will increase the Cortina group's value to both consumers and business partners.

The Business Times first reported in August that rumours of the possible deal had been swirling, and that an acquisition of Sincere would make sense as Cortina would be able to tap its peer's retail network in the massive mainland China market.

The target group to be acquired - including Sincere Watch's several subsidiaries and an associated company - operates 18 boutiques, with a portfolio including Omega, Audemars Piguet, Panerai and Tudor.

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Sincere Watch runs multi-brand retail under the Sincere brand in Singapore and Malaysia, and under the Pendulum brand in Thailand. In addition, it runs mono-brand boutiques for Franck Muller in Singapore and Australia, A. Lange & Söhne in Malaysia, as well as A. Lange & Söhne, Breitling and IWC in Thailand.

The purchase price of S$84.5 million represents a discount of about 0.2 per cent from the target group's net tangible assets as at June 30, 2020.

Cortina intends to raise around 60 per cent of the sum from bank borrowings and the remainder through internal resources.

As at Sept 30, the Cortina group had S$279.3 million in current assets, including S$122.3 million in cash and bank balances. It had current liabilities of S$74.9 million.

Cortina recorded a net profit of S$39.3 million for its financial year ended March 2020. According to Tuesday's filing, Sincere Watch incurred a net loss of S$6.4 million for its FY2020.

The purchase price of S$84.5 million represents 25 per cent of Cortina's market capitalisation based on a share price of S$2.04 -- the weighted average price of shares transacted on Nov 11.

The proposed acquisition constitutes a major transaction under listing rules, thus requiring Cortina's shareholders' approval.

Cortina said it has received irrevocable undertakings from shareholders representing more than 50 per cent of the voting rights to vote in favour of the deal.

The proposed acquisition would mark the fourth change of ownership for Sincere Watch since it was founded in 1954. It was first sold by Tay Liam Wee, the founder's son, in 2007 to now-defunct Hong Kong fashion and luxury watch retailer Peace Mark Holdings at S$530 million. Two years later, a consortium including Mr Tay bought back the watch retailer at S$112.7 million.

The company was subsequently sold to Hong Kong businesswoman Pollyanna Chu in 2012 for S$232 million, with Sincere Watch (Hong Kong) later carved out and listed.

Cortina said in the filing on Tuesday that completion of the proposed acquisition is also conditional upon Sincere Watch completing the disposal of its entire legal and beneficial interests in Sincere Watch (Hong Kong) to an entity wholly-owned by Mrs Chu. Sincere Watch owns 5.39 per cent of Sincere Watch (Hong Kong), as at end-March, according to the Hong Kong-listed firm's website.

READ MORE: Would Sincere Watch be a good buy for Cortina?