Eternite buys Larry HK and Singapore units for HK$400mn

The company aims expansion into the luxury jewelry retail market with a well-established niche brand.

Eternite International Company Limited, (“Eternite”) announced it was to acquire a target company which holds 100% of the equity interest of each of Larry Jewelry Limited (“Larry HK”) and Larry Jewelry (1967) pte. Ltd (“Larry Singapore”) at a consideration of HK$400,000,000 (subject to adjustment) from Solid Bonus Limited (“Vendor”), a company owned by Mr. Chan Tzuenn Man (“Vendor’s guarantor”) and his family members.

The transaction
The consideration is to be satisfied by as to HK$250,000,000 in cash and as to HK$150,000,000 (subject to adjustment) by the issue of the 3.5% per annum interest bearing Promissory Note. Among them, HK$50,000,000 promissory note falls due on expiry of 6 months from the completion date and the balance of HK$100,000,000 falls due on the first anniversary of the completion date.

The Consideration shall be adjusted downwards on a dollar-for-dollar basis if the completion inventory is less than HK$250,000,000. Accordingly, the Promissory Note shall be issued by the Company for the principal amount equal to the Consideration, as adjusted, less the sum of HK$250,000,000. If such shortfall is equal to or more than HK$150,000,000, the Company shall not be required to issue the Promissory Note and the Vendor shall pay in cash an amount equal to the difference between the shortfall and HK$150,000,000.

The Vendor guarantees that, subject to Completion, the total combined net profit after taxation but before depreciation, interest, capital expenditure and extraordinary items and excluding any other income of Larry (HK) and Larry (Singapore) and any other special vehicles to be established holding any further new shops shall not in aggregate be less than HK$70,000,000 for a period of 2 successive fiscal years commencing from the fiscal year when Completion occurs (the “Guaranteed Period”). In the event that the actual aggregate profit during the Guaranteed Period is less than HK$70,000,000, the Vendor agrees to pay a sum equal to the shortfall on a dollar-for-dollar basis, according to a Eternite report.

Operation of Larry (HK) and Larry (Singapore)
At present, Larry (HK) and Larry (Singapore) operates a total of 3 jewelry retail outlets in Hong Kong and 2 jewelry retail outlets in Singapore respectively, all under the brand name of “Larry Jewelry”. Being founded in 1967, it is one of the longest-established jewelry retailers amongst the major players in Hong Kong and Singapore, renowned for its unsurpassed mastery in jewelry design and gem setting technique. With stores situated at prime locations in Hong Kong and Singapore, Larry (HK) and Larry (Singapore) have established an extensive and long-established customer base whilst providing the most discerning customers with fine jewelry designed and handcrafted to suit individual tastes. Not only does it use the gem quality high-grade precious stones for its jewelry creations, Larry brand has also won numerous international and national awards for design and craftsmanship in Singapore and Hong Kong.

Mr. Joe Chan, Chairman of Eternite said, “We are very pleased to have entered into the acquisition agreement for acquiring a well established niche luxury jewelry brand, Larry. Leveraging its established market position, brand awareness and reputation in Hong Kong and Singapore, the acquisition offers an excellent platform for us to penetrate the China jewelry market.

As Larry brand is already a well known brand amongst tourists from the PRC as evidenced by the increasing number of customers coming from China in the past years, we are confident that the acquisition will bring enormous growth potential to us and broaden our revenue source. By bringing in more vibrant brands and business partners to develop the China market via acquisition or strategic alliances, we will fully utilize this platform to accelerate our future growth.”

After Completion, Eternite intends to open a new retail outlet under “Larry” brand in Causeway Bay and create a new line to capture new group of customers, and adopting new marketing plans. To tap the tremendous potential offered by the China jewelry market, it might also seek for business partners to develop jewelry retail business in major cities in China via acquisition or other strategic alliances. Eternite may further expand its business into a fully integrated value chain by identifying potential acquisition targets and business partners in the luxury goods sector and may consider expanding the business upstream, in particular in the area of diamond sourcing.

Mr. Chan added, “Larry brand has gained impeccable recognition in the diamond retail market and diamond sales constituted its mainstream revenue and profits in the past. By building up the vertical business model and being a niche diamond play, the acquisition is expected to offer the investment public a proxy to capture the rise in diamond price."