Jewelry Producer Aurafin Offers to Buy Rival OroAmerica
Two of the biggest gold jewelry manufacturers, privately held Aurafin and Burbank-based OroAmerica Inc., agreed Wednesday to merge in a $74-million transaction that would broaden the two companies’ product lines to reach all types of customers, from those who shop at discount chains to those who prefer finer jewelry.
OroAmerica stockholders have yet to approve the deal and details about the merger were still being finalized. But the two companies issued a statement saying that Tamarac, Fla.-based Aurafin would offer $14 a share in cash for OroAmerica’s stock.
Shares of OroAmerica soared $2.76, or 29%, to close at $12.36 on Nasdaq. But the closing price was well below Aurafin’s bid, suggesting some doubts about the deal among investors.
Both companies manufacture and distribute karat-gold jewelry to a variety of U.S. retailers, ranging from Wal-Mart Stores Inc., one of the nation’s largest jewelry retailers, to independent store operators.
Jewelry sales in the United States have steadily risen in the last couple of years, including a 6% bump in gold jewelry sales last year, according to the World Gold Council.
Amid rising demand, manufacturers view consolidation as the easiest way to produce mass quantities quickly and reach customers of every demographic, analysts say.
Retailers, such as Wal-Mart and QVC, the home-shopping network, prefer to deal with a manufacturer that can offer a range of products, said John Calnon, senior vice president jewelry, Americas, for the World Gold Council.
Aurafin’s finer Italian gold line, predominantly sold at independent stores, complements OroAmerica’s less expensive, trendier jewelry found in wholesale clubs, discount retail chains and department stores.
“Women of every demographic are buying gold jewelry right now,” Calnon said. “Strategically, it’s important to provide products that fall into different price brackets.”
Ed Leshansky, marketing director for Aurafin, said that he could not elaborate on the offer, but he did say OroAmerica’s jewelry styles would expand the company’s options.
OroAmerica officials were not available to comment. In the merger announcement, OroAmerica CEO Guy Benhamou said he would remain president of OroAmerica if it becomes a unit of Aurafin.
OroAmerica operates a manufacturing plant at its Burbank location where it makes most of its products.
OroAmerica’s sales have held steady in the last year despite an overall drop in sales reported by many retailers. In the fiscal year ended Feb. 2 the company’s sales rose 1% to $171.7 million.
In 1998, OroAmerica bought the Minneapolis-based Jene karat-gold jewelry business. In 1999, OroAmerica made an unsuccessful bid to buy Michael Anthony Jewelers Inc., another top U.S. gold-jewelry maker. Michael Anthony Jewelers had shown interest in acquiring OroAmerica in 1996.
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Mining for Gold
Jewelry maker Aurafin offered OroAmerica’s shareholders $14 per share, or a 46% premium over Tuesday’s closing price. Over the last three years, the stock has traded in the $6 to $12 range.
OroAmerica, monthly closings and latest on Nasdaq
Wednesday:
$12.36, up $2.76
Source: Bloomberg News
