First J. Lo, Now Fenway Returns H. Winston –

More often than not, when the Harry Winston name appears in the press, it adorns the gossip columns, where scribes debate who wore what on Oscar night and what celebrity is showcasing the most bling-bling. However, through its sale to Aber Diamond, the jeweler finally found its way into the business section, as Fenway Partners unloaded a partial stake in the company in an $85 million deal.

Fenway acquired a more than 60% share of the business, in both common and preferred stock, in July 2000, in a transaction that ended a decade-long dispute between the two sons of company namesake and founder Harry Winston. The brothers, Ronald and Bruce Winston, had been battling in the courts for control of the company when Fenway stepped in, siding with Ronald to buyout Bruce?s stake, which sent the younger sibling packing with $54.1 million in his pocket.

?Our entry allowed the brothers to resolve the dispute,? Fenway Chairman and Chief Executive Peter Lamm said. ?At the time of the investment, there was supercharged growth in the jewelry industry, but the company was inhibited by the cost and distractions of the legal troubles.?

When Fenway took over control, the firm focused first on streamlining the management team, leaving Ronald Winston in charge of the operations. From there, the company worked to expand Harry Winston?s product line, according to Lamm, and also initiated a growth plan that included the launching of new stores, including locations in Tawain and Las Vegas, which are set to open in the near future. ?We wanted to make the in-store experience accessible, but still maintain the company?s exclusivity,? Lamm described.

Through those initiatives, and without the distraction of ongoing legal squabbles, Harry Winston?s revenue has grown roughly 50% to 60%, according to Lamm, since Fenway?s investment three years ago. Cash flow, meanwhile, has jumped between 400% and 500% since the investment, Lamm said. Fenway declined to disclose exact financial performance numbers.

Once the business started showing demonstrable growth, Fenway decided to pursue a partnership with a strategic buyer. Lamm noted, ?In Aber, we were able to find a partner that can bring strategic value in sourcing stones and industry experience, and for us, it allows us to take some risk out of the investment.?

Through the sale, Fenway will take 75% of its original $62 million equity stake off the table, and still retain a 30% interest in the business, according to Lamm. Aber, meanwhile, acquired a 51% controlling interest, leaving Ronald Winston with the balance. Additionally, Aber has the option to acquire the remaining 49% stake held by Fenway and Winston in six years for fair market value.

Of the $85 million purchase price, $20 million is in the form of additional working capital, and Aber will make an initial payment of $40 million, with the balance of the $85 million being paid out over one year?s time. ABN Amro Bank N.V. arranged a $60 million credit facility to go along with the deal.

The transaction valued the company at between $225 million and $230 million, Lamm indicated, which, he added, represents a roughly 70% increase in value since Fenway first invested in Harry Winston.