Among the three candidate companies, Vacheron Constantin, focused on top-tier watchmaking, has the longest history, having been established over 200 years ago.
In 1987, the head of the controlling family, Jacques Ketterer, passed away, and his children chose to sell the brand. It was bought by Ahmed Yamani, the former Saudi Oil Minister who had just immigrated to Switzerland.
As one of the few high-ranking officials in Saudi Arabia not from the royal family, Ahmed Yamani rose to the critical position of Oil Minister through his exceptional abilities and orchestrated the 1970s Middle East oil crisis, securing substantial benefits for OPEC.
Unfortunately, personal ability couldn't outweigh palace intrigue.
In the mid-1980s, Yamani's strongest supporter, the Saudi Crown Prince, was assassinated. The following year, Yamani was dismissed from his position by the new Saudi King and moved to Switzerland to avoid further purges.
At the time, Vacheron Constantin was looking for a buyer, and Yamani took the opportunity.
Media reports claimed that the former Saudi Oil Minister loved watch collecting, which led him to buy Vacheron Constantin. However, to Simon, it seemed more like the typical strategy of many emerging country tycoons acquiring Western basketball or football teams—a way to gain fame and protection.
Vacheron Constantin, like Rolex and Patek Philippe, is one of the top Swiss watch brands. Owning such a company can significantly enhance the holder's international reputation.
Reputation often serves as an invisible shield.
From the mid-1980s until now, many years have passed. The political situation in Saudi Arabia has stabilized, and no one is interested in a long-fallen former Oil Minister. Yamani now seeks to sell this watch brand, which occupies a significant portion of his assets.
Unlike mass-produced ordinary watch companies, Vacheron Constantin has an annual output of just over 11,000 pieces. However, with an average price of over $10,000 and several luxury limited editions each year, its 1993 revenue reached $143 million, with a net profit of $21 million.
In initial contacts, Yamani's side quoted a price of $300 million.
Top watch brands, unlike clothing and luggage luxury brands, cannot rapidly expand production and marketing, so while they are stably profitable, their growth potential is limited. Given the 1993 profit scale, the $300 million offer represents a price-to-earnings ratio of 14, which is relatively high.
According to the assessment in the recent materials, the company should be acquirable for no more than $250 million.
Sophia handed Simon a glass of juice but didn't get off his lap, saying, "That's why I need you to make the decision."
Simon took a sip of the cold apple juice, wrapped an arm around Sophia's waist, and said, "Among the three companies, you're most interested in Bvlgari, right?"
Sophia nodded, adjusting herself for Simon's convenience. "I've investigated many comprehensive jewelry and watch brands—Cartier, Bvlgari, Piaget, and our own Van Cleef & Arpels. They all share a common trait: jewelry sales are the main revenue source, accounting for over 70% of total brand revenue, while watches typically only make up around 20%."
Simon chuckled, "So, it's true that women's money is the easiest to earn."
Sophia rolled her eyes at him and continued, "Unlike fashion and accessory companies like Gucci and CK, top jewelry and watch brands can't over-expand to maintain brand value. Keeping single-brand revenue under $1 billion is ideal. So, to expand this sector, we can only grow by acquiring multiple brands."
Simon directly pointed out Sophia's challenge: "The Bvlgari family is unwilling to sell too many shares. How do you plan to solve this?"
Sophia replied, "I considered that if we offer part of Melisandre's shares, the Bvlgari family might be interested."
Past acquisitions by Melisandre Company were all cash transactions, so apart from Simon and Sophia, there were no other shareholders.
Over the years, through several incentive-based equity transfers, Simon had given Sophia up to 20% of Melisandre's shares.
Due to the lack of listing, the valuation of Melisandre Company had varied widely, generally estimated between $5 billion and $10 billion. Even at the lowest valuation, Sophia was already a top female billionaire with a net worth of $1 billion.
Sophia had been very low-key about this, and the equity structure of Melisandre Company remained confidential. Many media outlets still thought Simon owned all the shares, so she never appeared on any wealth lists.
Using Melisandre's stock, one of the four women in the Westeros system, for a stock-swap acquisition, the Bvlgari family would understand its value.
Simon had no objections to Sophia's suggestion but warned, "Be sure, Sophie, that using Melisandre's shares this time might lead to similar demands from other brands in the future."
Sophia acknowledged, "I know, but we'll retain control for a long time. For instance, I think transferring 3% of the shares to the Bvlgari family should be enough. The rest can still be paid in cash."
Simon then asked, "What's the valuation?"
The valuation issue is always a sticking point in stock-swap acquisitions.
The wide range in external valuations of Melisandre is not without reason, as it's challenging to value the company accurately. Over the years, due to differing equity shares and diverse subsidiary types, Melisandre's financial reports have been calculated separately for each subsidiary.
Take 1993, for example.
Gucci remains Melisandre's core, with a 75% stake, generating $1.89 billion in revenue with a 32% growth rate and a net profit of $310 million.
Then:
Van Cleef & Arpels: 60% stake, $350 million in revenue with a 35% growth rate, and a net profit of $59 million.
CK: 55% stake, $170 million in revenue with a 33% growth rate, and a net loss of $8 million.
Château Latour: 100% stake, $36 million in revenue with a 7% growth rate, and a net profit of $6 million.
Christie's auction house: 31% stake, $2.36 billion in auction sales with a 41% growth rate, and a net profit of $73 million.
Calculated according to equity shares and profits, Melisandre's profit attributable to the parent company in 1993 was about $290 million.
However, to support the subsidiaries' development, Sophia didn't fully distribute the dividends, reclaiming only about half of the profits.
If calculated based on a profit of $290 million and given the high growth rate of over 30% for brands under Melisandre except for Château Latour, an IPO with a 20x price-to-earnings ratio would easily yield a valuation of nearly $6 billion.
If it were listed, the post-IPO price-to-earnings ratio would likely exceed 30x, leading to a market value of over $10 billion.
Without listing, using a stock-swap acquisition model, the valuation issue will inevitably cause negotiation friction.
The best solution is, of course, going public.
Sophia, predicting Simon's thoughts, didn't oppose Melisandre's potential IPO at the right time and said, "If we go public, it won't be possible this year."
Simon considered it and said, "Then negotiate. Try not to lose too much. Also, hint at the potential IPO to the Bvlgari family, which might give us some leverage."
Sophia nodded.
The miracle of Daenerys Entertainment's IPO, creating a high market value, is well-known even in Italy.
Melisandre, also a 'woman' of the Westeros Company, has a promising IPO outlook. The Bvlgari family should understand that private Melisandre shares could double in value within a year or two after an IPO.
Such a return is very tempting.
Having discussed her preference for Bvlgari, Simon asked, "What's the situation with Versace?"
Sophia explained, "I met Gianni Versace at the Cannes Film Festival in May. After a brief chat, he invited me to a Versace brand event. We had several interactions afterward. In mid-June, Versace hinted he was interested in me investing in his company."
Simon smiled and asked, "What do you think?"
Sophia took Simon's now empty glass, sipped the last bit through a straw, and placed it aside. "Versace clearly wants to use our influence to get rid of the Mafia, so it's not about what I think, but what you think. You're the man, so you should decide on this."
Why was Gianni Versace murdered?
Because Versace wanted to go public.
Once public, the company would have to disclose its operations and finances, preventing certain people from using Versace for money laundering.
Ultimately, Gianni Versace wanted to escape the Italian Mafia.
Unfortunately, he didn't succeed.
Simon had no fear of the Mafia.
The Italian Mafia prides itself on being a group of desperados, but Simon, who dared to start a war in Africa, is a higher-level desperado.
Moreover, the Mafia shouldn't forget Mussolini's ruthless methods.
Due to the recent public discontent over worsening security, the Italian government has been increasing its anti-Mafia efforts. Given the Westeros system's extensive political and business network in Italy over the years, if the Mafia dared to provoke him, Simon wouldn't hesitate to instigate a larger-scale crackdown.
Feeling the cold intensity emanating from Simon, Sophia realized her mistake.
A grave mistake.
Her powerful man wasn't afraid of such underworld forces, which is why she presented the
Versace information to him.
However, she didn't want to awaken the devil inside him over something so trivial. She didn't want him wrapped in negative emotions that shouldn't touch him. He should always be dignified.
Thinking this, she said, "I've decided. The next target is Bvlgari."
Simon held her waist, meeting her gaze for a moment, then suddenly laughed, "Are you worried I'll suddenly go insane and..."
Sophia, her face rubbing against his slightly stubbly cheek, affirmed, "It's Bvlgari."
Simon nodded slightly. "Alright, it's up to you. But it wouldn't hurt to buy Vacheron Constantin as well."
The global luxury mergers of the late '90s began with Europe's economic revival. Now, with sufficient funds and strength, it's better to acquire more luxury brands sooner rather than later.
Sophia softly agreed.
They didn't mention Versace again.
However, Simon occasionally thought that if he couldn't acquire such a company, it should be destroyed. Versace's style closely matched Gucci's, making it a direct competitor. If Gianni Versace couldn't ally with the Westeros system, maybe pushing him to go public ahead of time would be better.
Having made up his mind, Simon outwardly continued discussing the details of acquiring Bvlgari and Vacheron Constantin with Sophia. They left Martha's Vineyard together around ten in the morning.
Returning to Greenwich, it was almost noon, so they had lunch at Sophia's home before Simon headed to the airport to return to the West Coast.
In the front cabin of the Boeing 767.
Once the plane was stable, Miss A brought a thick stack of documents for Simon to review into the cabin study. Neil Bennett also handed Simon a briefcase containing the Westeros family intelligence team's periodic action reports and summaries.
Simon didn't open the briefcase immediately but first reviewed the past week's North American box office data.
Today is July 16, Saturday.
In the week from July 8 to July 14, two new films were released in North American theaters. "True Lies," created by James Cameron and Arnold Schwarzenegger, managed to withstand the phenomenal "Forrest Gump," grossing $40.83 million in its first seven days.
This success was also due to the significant difference in audience appeal between "True Lies" and "Forrest Gump."
"True Lies" is a big action movie with lots of popcorn appeal. Coupled with the resurgence of audience interest a month after the early June release of "Batman: The Dark Knight Rises," and no other blockbuster action films in the meantime, it achieved success.
However, "True Lies" still only ranked second on the box office chart.
In its second week, "Forrest Gump" increased its screen count from 2,137 to 2,836, with only an 11% drop in weekly revenue, grossing another $47.53 million, easily retaining the top spot.
In just two weeks, "Forrest Gump" entered the $100 million club, with a cumulative gross of $109.8 million.
In its sixth week, "Batman: The Dark Knight Rises" ranked third, with a 26% drop, grossing another $18.61 million, bringing its cumulative total to $316.28 million.
At its current pace, "Batman: The Dark Knight Rises" has a good chance of surpassing the $400 million mark.
The other new release, Julia Roberts' romantic movie "I Love Trouble," grossed only $12.28 million in its first week, ranking fourth.
Daenerys Entertainment initially signed a five-film deal with Julia Roberts. However, with many changes and her continued popularity after hits like "Pretty Woman" and "The Pelican Brief," Simon didn't value her as highly.
Moreover, lacking suitable projects, Simon allowed Roberts to work with other studios.
Warner Bros. invested $45 million in "I Love Trouble," largely due to Roberts' involvement. With a first-week gross of $12.28 million, less than half of Warner's expectations, the film's projected $30 million total gross would mean another loss for Warner.
Following the earlier flop "The Cowboy Way," another high-budget romance film had stumbled. Warner had to rely on the profits from "Batman: The Dark Knight Rises" to offset the losses.
According to Miss A's notes on the box office report, Time Warner's stock dropped 2.9% on the last trading day of the week, reducing its market value from $16.1 billion to $15.6 billion, evaporating $500 million in a single day.
Under the impact of "True Lies," the fourth-week gross of "The Conjuring" dropped 31% to $12.15 million, narrowly trailing "I Love Trouble" and ranking fifth.
However, the opening film of the Conjuring Universe had already grossed $96.31 million, soon to break $100 million.
Jack Nicholson's new release "Wolf," after its July 1 Independence Day weekend release, saw a 54% drop in its second week, grossing only $11.45 million, ranking sixth. With a two-week cumulative gross of $36.36 million, its total North American gross was projected around $50 million.
Considering the film's $50 million production cost, the unlucky Jack Nicholson had no chance of a comeback.
Beyond the six films grossing over $10 million in a single week, the seventh-place "The Shadow" grossed only $7.51 million. This comic adaptation had a two-week cumulative gross of just $22.18 million.
Other films like "Blown Away," "City Slickers II," and "Beverly Hills Cop III," initially highly anticipated by major Hollywood studios, had completely exited the summer competition under the onslaught of "True Lies" and the phenomenon of "Forrest Gump."
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