Tiffany Will Empty its Pockets to Pay Swatch for Botched Joint Venture

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The Tiffany & Co./Swatch joint venture that was formed back in 2007 has been dissected in the courts for the past two years and has finally come to an end, with an arbitration panel telling Tiffany & Co. to pay $449 million to Swatch. One member of the panel offered up a dissenting opinion, saying that Swatch’s claim should have been dismissed, according to the Wall Street Journal, but the other two panelists disagreed. 

As happy as Swatch might be with the payout, the breakup has left both parties a bit sour. As Forbes reports, Tiffany & Co. wanted a company with watch expertise to take over its still-new luxury-watch business that made up a small percentage of its annual overall take and Swatch wanted to have a high-end jewelry-watch brand as part of its large portfolio of timepieces. After signing what would have been a 20-year deal, it seemed like it would be a boon for the watch industry overall and certainly for the two companies.

But troubled began brewing early on. After the first set of watches were released in 2009, Tiffany didn’t seem happy with the mainly-Swatch design. The same went for the 2009 designs, and in 2011, both companies’ lawyers jumped in the ring to exchange lawsuits, first against Tiffany, and then against Swatch.[more]

The $449 million that Swatch was awarded is “only a fraction of the total amount they wanted in damages.” Swatch had originally asked for 3.8 billion Swiss Francs ($4.2 billion), while Tiffany didn’t fare much better: Its suit against Swatch was thrown out along the way.

The award will help offset the $1 billion Swatch paid to acquire Harry Winston earlier this year when it decided that instead of partnering with a luxury jewelry maker, it might be better to just have one in the brand stable.

Tiffany, of course, was not happy with the decision. As Bloomberg Businessweek notes, the settlement is more than Tiffany brought earned in net income last year. “We were shocked and extremely disappointed with the decision of the majority of the arbitral panel,” said Michael J. Kowalski, chairman and chief executive officer, the Journal reports. “We firmly believe the panel’s ruling is not supported by the facts of this case or the various agreements between the Swatch parties and the Tiffany parties. 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.”

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