Is Something Rotten In Le Brassus? Part 1
Natural Aspiration 12: Dissension Within The Ownership Group at Audemars Piguet
While my typical remit adheres to the automotive and motorsport spheres, my areas of interest are vast. Among my other passions is horology (haute or otherwise), and I have been blessed to own and enjoy several significant timepieces.
Rolex Daytona - The definitive “car guy” watch, so they say. Famously, the Rolex Oyster Perpetual Cosmograph Daytona is the meta-trophy for overall and class winners of the Rolex 24 at Daytona, as well as overall winners of the 24 Hours of Le Mans. I have a friend who earned a few Daytonas the hard way; i.e., multiple overall victories at the Circuit de la Sarthe - prosperous dentists and floormat scions need not apply.
Audemars Piguet Royal Oak “Jumbo” - In my opinion, this watch represents both the greatest horological design (yet), as well as one of the most significant watches ever created. The “Jumbo” moniker is a misnomer, as this slender, 39mm watch was only considered sizable upon debut in 1972. The Royal Oak served as Audemars Piguet’s salvation in the dark days of the Quartz Crisis and paved the way for luxury sports watches rendered in steel, a humble material in relation to the precious metals with which Audemars Piguet had worked through 1972. Forty years later, the brand re-released the “Jumbo” in tribute to the original Royal Oak. It would be akin to Porsche re-releasing a 1963 901 generation 911 today.
Audemars Piguet Royal Oak Offshore “Ghost” - Twenty years after the Royal Oak arrived, the brand introduced a larger, sportier, more casual variant aimed at younger customers. Enter the Offshore. Since 1993, the Offshore line has seen a proliferation of adventurous designs and inventive materials. The “Ghost” version is a monochromatic chronograph with a titanium case and a scratch-proof ceramic bezel on a natural rubber strap.
Rolex is the undisputed King of the horological scene - hence the Crown. Rolex delivers the thick end of one million watches annually, yet their offerings remain deeply sought-after despite their seeming ubiquity. Although the Crown’s yearly output is staggering, demand still outstrips deliveries, which pushes secondary market pricing higher and burnishes the brand’s reputation as a “gotta have it” signifier. Rather than capture every last potential Swiss Franc available today, Rolex aspires to safeguard its brand for the future. This strategic impetus is possible because Rolex is privately held; it is, in fact, owned by a charitable trust named for the brand’s founder, Hans Wilsdorf. Having already made the leap from tool to wrist ornament, Rolex is now focused on ensuring its long-term relevance. Your descendants a century hence are perhaps more likely to covet or wear a Rolex than the latest iteration of the Apple Watch (assuming, of course, that Apple exists at that point).
It is around the Rolex center of gravity that the remainder of the Swiss watch firmament orbits, even the elite, exclusive watchmakers in the rarefied alpine air at the top of the industry.
While there are impassioned - occasionally, inflamed - arguments about which brands are -or are not - part of the elite group, there is a consensus around the watch manufacturers comprising the Holy Trinity, a trio of venerable, long-standing firms that create refined, luxurious timepieces featuring superior materials and much finishing by hand; taken alphabetically:
Founded: 1875; headquartered in Le Brassus, in the Vallée de Joux.
Ownership: Private; Audemars and Piguet family heirs.
Annual Production: ~50,000 units.
Known For: Inventive materials innovation (steel, carbon fiber, ceramic, natural rubber, etc.) and finesse in case and bracelet finishing (brushing, polishing, satin, etc.); Royal Oak family; independent ownership.
Also: Audemars Piguet owns 10% of Richard Mille.
Founded: 1839; headquartered in Canton of Geneva, in the Vallée de Joux.
Ownership: Private; Stern family purchased Patek from original ownership group heirs in 1932.
Annual Production: ~60,000 units.
Known For: Complex “Grand Complication” timepieces; perpetual and annual calendar watches; iconic marketing.
Founded: 1755; headquartered in Canton of Geneva, in the Vallée de Joux.
Ownership: Public; Richemont subsidiary since 1996.
Annual Production: ~20,000 units.
Known For: Historical legacy - see Historiques collection; checkered past with respect to ownership.
As an obvious Audemars Piguet devotee and a cautious observer regarding the ills of (purely) financially motivated ownership (see recent Ferrari and Porsche articles), I met a recent luxury industry “insider” report with considerable consternation (emphasis mine throughout):
Audemars Piguet (AP) is one of the biggest success stories in luxury watches of the last decade. Founded in 1875, AP is the last historical watchmaker of its size still in the hands of its founding families. However, this may not last forever as some of its minority shareholders are exploring a possible sale of their holdings, Miss Tweed has learned. In a few years, LVMH could end up being the ultimate owner, sources with first-hand knowledge of the matter said.
AP has never been stronger in terms of cachet, sales and profitability. It commands the highest premiums on the second-hand market, together with Rolex, Patek Philippe and Richard Mille. Now is the best time to cash in, some shareholders believe, as the brand is at a crossroads. Its longstanding CEO, François-Henry Bennahmias, is due to leave next year and a replacement has not yet been found, industry sources said.
Jasmine Audemars resigned in August after nearly 30 years as chairman of the board. The 82-year-old guardian of the temple was replaced by ex-Tiffany boss Alessandro Bogliolo, a choice that surprised many including Bennahmias himself, sources close to the company said. Bogliolo’s specialty is not watches. He has experience managing luxury brands and selling them at the highest price possible. The Italian businessman did a good job securing the sale of Tiffany to LVMH in 2020, pocketing more than $40 million in the process.
Bogliolo worked with Roger Farah, father of (Very) Fortunate Son and sometime socialist Matt Farah of The Smoking Tire fame, to secure Tiffany’s sale to LVMH.
Bogliolo, who is due to start on Nov. 11, was not hired by AP not [sic] to steer the watchmaker -- he is not planning to move to Switzerland anytime soon -- but to help some of its minority shareholders monetize their stake, sources with first-hand knowledge of the matter said.
AP has the brand power to overtake Patek Philippe and propel itself into an even bigger league. But do its shareholders want that? Jasmine Audemars and Olivier Audemars favor letting the company grow naturally, without any external boost, sources close to the company say. They never expected it to become as big as it has done, and with their conservative, patrimonial views, they have always said they want AP to remain independent and family-owned.
This year, the brand will produce some 50,000 watches, up from 45,000 in 2021, having abandoned an earlier self-imposed limit of 40,000. AP is spending hundreds of millions of euros on a new production site, which is due to bring under one roof many of its different suppliers – just as former sister brand Jaeger-LeCoultre did a few years ago. Once the new production site is up and running in 2024, production at full capacity could reach 70,000 timepieces by 2025.
In the next five to ten years, AP could decide to raise that number to 100,000 or even 200,000. That would require significant investment, which not every AP shareholder is keen to make. So now is a good time to sell and let in a new investor. This view is shared by Oliviero Bottinelli, a member of AP’s board who runs the brand’s business in Asia, several sources close to the company say.
Oliviero Bottinelli’s influence over AP’s affairs and power within the board has grown, they said. His father, Pierangelo, a former investment banker, inherited a stake in the company after helping Audemars Piguet survive financial difficulties a few decades ago. “It would indeed appear that the Bottinellis’ voice has become louder,” one of the sources said. It was the Bottinellis who pushed the choice of Bogliolo on Jasmine and Olivier Audemars, the sources added.
All of AP’s five shareholders have first right of refusal if one or several wish to sell all or part of their stakes. Industry sources estimate that [another minority group] and [the] Bottinellis together own over 20 percent of Audemars Piguet. Using the company’s projected revenue estimate for next year of close to 2 billion Swiss francs, industry analysts estimate AP is worth at least 6-7 billion Swiss francs. For argument’s sake, 20 percent of that amount would be some 1.2 billion Swiss francs, which at today’s exchange rate is €1.24 billion.
That is a sizeable sum for Jasmine Audemars, Olivier Audemars and Steven Petruzzello to find if they want to buy out the other two shareholders. But they have several options.
One would be for the company itself, i.e. Audemars Piguet, to take on debt and buy their stake to keep any external investor out. The three shareholders wanting to preserve the company’s independence would probably favor this. But in light of the major investments AP needs to make in the future, this plan might not be easy to realize. As the global economy worsens, the credit market is expected to tighten further. Interest rates will go up, raising the cost of borrowing.
Another option would be to invite Rolex to chip in. The industry leader is one of the most profitable companies in Switzerland and it belongs to a foundation, making it impregnable. But that might not be simple either. Rolex is happy to remain a stand-alone company, industry sources say. It has enough on its plate producing an estimated one million watches a year while maintaining quality.
The likeliest external investor is LVMH. The French group has made no secret of its wish to acquire a major watchmaker to complete its stable of “hard luxury” brands. Since ownership has been transferred to the younger generation at independent brands Patek Philippe and Richard Mille, Audemars Piguet is the last big target available.
Selling to LVMH may be the last thing Steven Petruzzello, Oliver and Jasmine Audemars want but it could happen at some point, industry insiders predict. “I think LVMH will do anything it can to buy Audemars Piguet,” one senior executive at the group said on condition of anonymity. The group owns TAG Heuer, Zenith and Hublot but these brands are much smaller than AP.
Taking on AP would put LVMH in the big league. Already strong in jewelry with Tiffany, Bulgari and Chaumet, it could grow even larger than the current watch and jewelry industry leader Richemont, owner of jewelers Cartier and Van Cleef & Arpels and watch brands Vacheron Constantin, IWC and Panerai.
When it comes to hunting, don’t forget that patience is one of the prime qualities of Bernard Arnault, CEO and controlling shareholder of LVMH. Arnault may be satisfied with a minority stake to begin with but after a while, he starts surreptitiously creating discord and turning the shareholders against each other. Eventually, they grow desperate and throw in the towel. That’s how Arnault buys them out.
Every family has weaknesses and baggage and the 73-year-old tycoon is a past master at exploiting them. He played that game at Hermès, pitting different clans of the family against each other, although after some time family shareholders united against him. Arnault takes a very long-term view. This is partly why LVMH is so successful and highly valued.
In fact, that’s how he bought Louis Vuitton itself; Christian Dior was his initial luxury purchase. For more on Arnault’s Machiavellian machinations, I recommend the book Deluxe: How Luxury Lost Its Luster.
Arnault has big ambitions for the group’s watch and jewelry division. It is no coincidence that the three sons from his second marriage work there now. Alexandre, 30, the eldest, is No. 2 at Tiffany, in charge of products and communication. Fréderic, 27, runs TAG Heuer while the youngest Jean, 24, works for Louis Vuitton watches and is involved in many areas from strategy to marketing.
A final note: Arnault’s daughter - Delphine - sits on the Ferrari Board of Directors.
Provided you are unmoved by the persuasive reportage of Miss Tweed or my own related commentary on the contemptible Arnault / LVMH, which buys up wonderful heritage brands and then increase prices and output while lowering costs until the proverbial cow dies after having been milked to death, perhaps you’ll cotton to the arguments of (Kan)ye West.
Thank you for this, full of information! - If you like, what is your take on Tudor (to me, a more arrogant statement than Rolex), Hublot (incredible early designs, now glitzy and low-brow), Corum (lost it, no?), Omega (I love the Constellation) etc? Or the motorsport-themed watches by Chopard etc?