Graff Diamonds will market shares for its $1-billion (U.S.) listing in Hong Kong in a range of $25 Hong Kong ($3.22 U.S.)- $37 Hong Kong ($4.76 U.S.), people familiar with the process said on Friday.
The listing will value the ultra-high end jewellery producer and retailer at $3-billion (U.S.)- $4-billion, while its founder and controlling shareholder Laurence Graff will take a windfall of $290-million from a reorganization of the group’s assets.
Mr. Graff, who grew up in London’s east end, will sell some businesses and stone collections into the larger group as part of its consolidation into a new, coherent company. But he will also buy back non-core assets such as a South-African vineyard and luxury estate and a number of paintings valued collectively at $8.2-million, which includes Portrait of Cézanne by Camille Pissarro, which is on loan at the National Gallery in London.
Graff’s initial public offering comes during a relatively barren spell for the Hong Kong IPO market, which had been the leading stock market for new listing for the past three years.
However, the company and its advisers are confident that its high end brand and its growth prospects in a world where the super-rich keep getting richer and growing in number, mean it should see strong uptake for its stock.
The very wealthiest people - those with $30-million or more in investable assets - have grown from 78,000 people worldwide in 2008 to 103,000 in 2010, according to a report from Merrill Lynch and Capgemini. Within this, China, India and Russia saw the fastest rates of growth.
Graff specializes in sourcing some of the biggest and most expensive stones in the world and identifying the people who are willing to buy them. It has an inventory worth almost $900-million at cost, of which 50 per cent are individual stones or items of jewellery containing stones of 10 carats or more.
The company only revalues individual pieces at their point of sale and analysts at Credit Suisse have estimated that the inventory could ultimately be worth $2.5-billion-$3-billion, which would approach the market capitalization of Graff itself.
One person close to the business said this stock, which has included famous stones such as the Graff Pink and Delaire Sunrise, and items such as the Lesotho Promise necklace, was the company’s main competitive advantage. “It is an inventory that is extremely rare and that can be delivered immediately,” the person said. “The customer can’t get that anywhere else.”
However, the group is reliant on a few individuals with enormous fortunes and their desire for diamond jewellery. The same person has been Graff’s top customer three years in a row, spending $70-million on one piece on 2009, $61-million on two pieces in 2010 and $119-million on three pieces in 2011.
But these people can tire of such shopping. “It is not uncommon for a particularly high value customer to build a multimillion dollar collection of our pieces over a period of three to four years and then to reduce or cease their purchases of our jewellery,” the company said in its prospectus published in Hong Kong on Friday.
Part of the reason for expanding abroad is to find new clients for this hoard. Sales figures for the first three months of this year showed Asia as delivering the strongest growth with sales of $36.1-million, up 115 per cent from $16.8-million in the same period a year ago.