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The Hermès-backed movement provider Vaucher Manufacture Fleurier, the independent watchmaker Parmigiani Fleurier and several other watch component suppliers have been put up for sale by their parent Sandoz Family Foundation, sources with first-hand knowledge said.

Now is a good time to sell, they say. Parmigiani has stopped losing money since last year and analysts believe demand for luxury watches should improve in the second half of 2024. The luxury watch industry has been through a painful downturn in the past 12 months as consumers seek better value for money after the pandemic-led shopping euphoria and are less inclined to invest in high-end pieces by brands few people have heard of. Megabrands such as Rolex, Audemars Piguet (AP) and Patek Philippe, meanwhile, have continued to win market share.

Deloitte have been appointed as advisers to coordinate the bidding process and test buyers’ appetite for the Parmigiani brand, as well as for Vaucher Manufacture and other suppliers, several industry sources said.

Deloitte would not deny on the record that it had been retained. The Sandoz Family Foundation declined to comment.

The Foundation already tried to find a buyer for its watchmaking hub several times, including once three years ago, but discussions failed to produce a deal. Parmigiani Fleurier and Vaucher Manufacture Fleurier and its other suppliers may be rare assets – it is not every day that such a vertically integrated brand is put on the market – but the sale process is far from straightforward. There are many vested interests and no clear buyer for the entire watchmaking hub has emerged yet, industry sources say. The Parmigiani brand may interest a private equity firm or a family office, but no bidder will have the means to compete against big brands such as Hermès or AP for some of the production assets. It’s unlikely the industry leaders Swatch Group, Richemont or LVMH would want to bid since they have their own production facilities, industry sources say.

The Sandoz Family Foundation, one of the richest in Switzerland, owns several luxury hotels, including the Beau-Rivage Palace in Lausanne, and finances many cultural institutions and events such as the Montreux Jazz Festival.

It belongs to the descendants of Edouard Sandoz, co-founder of Sandoz SA, today known as Novartis, a pharmaceutical group based in Basel. The Sandoz Family Foundation is the biggest shareholder in Novartis with a 3.45 percent stake and receives hundreds of millions of euros a year in dividends. According to its website, it aims to help preserve Swiss know-how and encourage “entrepreneurial commitment through long-term holdings in companies in various sectors”.

For many years, the Foundation was led by Pierre Landolt, one of Edouard Sandoz’s great-grandsons. Now it is managed by a small group of people including the lawyer Monika Matti. Sources in Switzerland say members of the younger generation are trying to reform the way the Foundation runs things, with more focus on profitability and return on investment. In the past, it was known for not really caring about the losses its various investments incurred.

Watchmaker Michel Parmigiani used to repair and restore the Sandoz family’s old clocks and historic watches. In 1996, the family helped finance the launch of his brand. Over the past 30 years, not only has it mopped up his brand’s losses, estimated to total several hundred thousand Swiss francs, but also those of many of its many suppliers. Some industry sources estimate that the foundation lost more than one billion Swiss francs overall in its watchmaking investments.

The initial goal was to develop the brand of Michel Parmigiani, a family friend, and create an haute horlogerie rival to Patek Philippe and AP. The strategy was to invest in the production know-how and tools necessary to safeguard its supply chain and strengthen its image. The family aimed to tap into consumers’ growing appetite for high-end mechanical watches that were produced in-house and named after master watchmakers, just like F.P. Journe.

VAUCHER MANUFACTURE

One key asset is Vaucher Manufacture. Founded in 2003, it provides a vast range of mechanical watch movements and has supplied not only Parmigiani and Hermès since its early days, but also other major brands such as Richard Mille and AP. AP owns 20 percent of Richard Mille, the industry’s most profitable watchmaker.The two brands work together on research and development in various areas from materials to movements.

Hermès has injected more than €120 million in Vaucher Manufacture to keep it afloat financially and retain its 25-percent stake, industry sources say. The French luxury brand, which started investing in Vaucher Manufacture in 2006, made an offer several months ago to buy the remaining 75 percent, but the Foundation rejected it as too low, they said.

A spokeswoman for Hermès wrote in an email to Miss Tweed. “I can confirm that we do not wish to comment on such news, but that we reaffirm our attachment to Vaucher Manufacture Fleurier and our position as a strategic shareholder with the rights that go with it.”

The Vaucher Manufacture is strategic for Hermès which is why it has been trying to buy it for many years. Until a decade ago, Hermès was known mainly for its popular watches with quartz movements and double bracelets retailing for €2,000-€3,000. In the past few years, it has been introducing more high-end pieces costing more than €12,000 paying great attention to design and innovation in terms of “poetic” complications and sophisticated movements. Vaucher Manufacture gives it legitimacy and plays an important part in its watchmaking narrative.

Last year, Hermès made €611 million in watch sales, up 23 percent at constant exchange rates.

The maker of Kelly and Birkin handbags reported some of the strongest results in the luxury industry earlier this month, with total revenue up 20.6 percent at constant exchange rates. If Hermès wants to buy Vaucher, it has the cash. The Paris-based company had €10.6 billion on its balance sheet as of Dec. 31.

However, relations between the Sandoz Family Foundation and Hermès have been fraught. A few years ago, the head of Vaucher Manufacture was sacked without consulting Hermès. The move infuriated the French luxury brand. The person in charge of the brand’s watchmaking investments and operations is Guillaume de Seynes, a descendent of Emile Hermès who is in charge of investments at Hermès and vice-president of the Manufacture.

Vaucher Manufacture’s other important client, AP, may also be bidding for the provider of high-end movements, industry sources say. However, AP needs it much less than Hermès since it has invested in a major new production facility that should be operational this year, producing more than 70,000 watches when it reaches full capacity. That could happen as early as next year.

PARMIGIANI

The deal to sell the watchmaking hub of the Sandoz Foundation is a complex one. Ideally, the foundation would like to find a buyer for the whole thing, but that is unlikely since only Hermès and AP would be interested in Vaucher Manufacture, industry sources say.

The Parmigiani brand itself is not a big player in the industry. Last year, it is estimated to have generated just over 65 million Swiss francs in revenue in 2023 – up from 26 million Swiss francs in 2019 – and aiming for further steady growth this year. “Parmigiani is for sale because it stopped losing money,” one of the sources said. The watchmaker is still burning a little cash but at least it is breaking even, several sources said.

That is partly why now is a good time to sell the brand and its suppliers, they explained. Under the leadership of Guido Terreni since early 2021, Parmigiani has enjoyed a revival. The brand has narrowed its focus on its best-selling model, the Tonda PF which has a minimalist and recognizable integrated design. Steel models start at around 20,000 Swiss francs.

The brand has won several watchmaking prizes in recent years. In July 2023, Terreni told watch trade magazines he tripled the brand’s sales in two years. Parmigiani has benefited from a shortage of popular models such as AP’s Royal Oak and Patek Philippe’s Nautilus which cost about the same and have similar designs. Consumers bought a Parmigiani Tonda PF instead, watch retailers say. Parmigiani is distributed mainly by third-party retailers. It has not invested in its own network of boutiques.

One element complicating the sale of the Parmigiani brand is the fact that it does not own the intellectual property (IP) of its movements. Those belong to Vaucher Manufacture. “This means that whoever buys Parmigiani, is buying a brand without the IP of its movements,” one former watch luxury executive told Miss Tweed on condition of anonymity.

Also for sale are the brand’s suppliers including Atokalpa, a provider of key elements such as balance wheels and springs, and Elwin, which supplies hardware for mechanical movements. Industry sources say Patek Philippe and Chopard are shareholders in both companies. Neither brand replied to Miss Tweed’s requests to verify this.

Part of the Sandoz Foundation’s watch producing hub is Quadrance & Habillage, a specialist maker of watch dials with expertise in guilloche and engraving. The watch suppliers work for many of the world’s top watch brands. Together with Vaucher Manufacture, they employ more than 500 people, spread between Alle in the canton of Jura, la Chaux-de-Fonds and the Vallée de Joux, three of Switzerland’s most important watchmaking hubs.

The board of Parmigiani Fleurier recently welcomed Philippe Peverelli, who headed Rolex sister brand Tudor for many years. Peverelli is meant to strengthen Parmigiani’s leadership and help the company find new investors. “Peverelli gives more credibility to the board as the company is now on the market,” one industry source said. Michel Parmigiani, 73, is still a small shareholder and is consulted about design, but he has not been involved in the brand’s day-to-day operations for many years.