Hong Kong—Chow Tai Fook Jewellery Group Limited and Hearts On Fire Company announced Wednesday that they will merge. Chow Tai Fook, an 85-year-old jewelry company that is the world’s largest pure-play jeweler by market capitalization, will buy Hearts On Fire for US $150 million (approximately HK $1,170 million) on a cash-free and debt-free basis. The proposed acquisition will be fully funded by Chow Tai Fook’s internal resources.
Hearts On Fire will be run as a standalone business within the Chow Tai Fook Group under the continued leadership of CEO and chairman Glenn Rothman and the senior management team. In addition to its existing sales network, Hearts On Fire products will be introduced to the Hong Kong, Macau, and Mainland China markets through Chow Tai Fook’s extensive retail network, employing the Hearts On Fire “shop-in-shop” and “counter-in-shop” models within six months upon completion of the proposed acquisition.
For its U.S. retailers of Hearts On Fire, the global expansion will bring increased brand awareness and a consistent diamond supply, says CEO Rothman. But what the change won't bring--for now--are more branded stores in the United States, such as the one in King of Prussia, PA (shown top left), or Las Vegas, NV.
"Our focus for the near term is to grow our independent retail network, both with same-door sales and expanding with new retail partners, as well as our expansion into mainland Hong Kong and China. We will pause the opening of any new stores to focus on these two important priorities," Rothman told The Centurion.
Eurostar, which manufactures the Hearts On Fire diamonds, will continue, but "as a supplier, not an owner," says Rothman. Finished jewelry manufacturing will be divided between Asia and the United States, as it is now.
"Many of these manufacturing partners will remain the same. For instance, most of our engagement ring designs are manufactured here in the U.S., which is necessary given that [we] guarantee our engagement rings deliver within two weeks of ordering. International shipping would make this difficult to impossible. However, the jewelry we will sell in China, which will be a significant volume once we ramp up, will need to be manufactured in China due to import duties and taxes," said Rothman.
Chow Tai Fook chairman Dr. Henry Cheng said, “We welcome Hearts On Fire as our valuable partner that shares the same vision for high quality and innovative products. The proposed acquisition is a strategic move to complement our product portfolio with an exclusive premium diamond jewelry line and to raise our profile as world-class diamond expert in the jewelry industry.”
"Hearts On Fire is a best-selling luxury diamond brand with strong consumer awareness, and its product offerings are ideal additions to our existing portfolio. The acquisition is in line with the Group’s strategy to optimize product mix and promote higher value products to match the spending profiles of consumers. Given its proven track record not only in the western markets but also in Taiwan, the Group is confident that the Hearts On Fire products will be well received in our major markets, including Hong Kong, Macau, and Mainland China, where diamond jewelry is increasingly popular,” added Kent Wong, managing director of Chow Tai Fook.
While the United States is the largest market for Hearts On Fire, it already has a global presence at more than 500 locations in 31 countries.
“Chow Tai Fook brings powerful financial resources, high-tech manufacturing capacity, and their innovative culture of creative talent. These “best-in-industry” resources will provide Hearts On Fire the support and opportunity to expand exponentially as we enter new markets, leveraging Chow Tai Fook’s leadership in the jewelry industry and its extensive retail network in Greater China. This is an unprecedented opportunity to grow the Hearts On Fire brand and reach millions of new customers,” said Rothman.
With minimal overlap between Chow Tai Fook and Hearts On Fire’s operations, a smooth integration is expected within a relatively short time.