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Exclusive: Lion Capital buying Canada’s Spence Diamonds

April 8, 2015, 2:03 PM UTC
A diamond is displayed at the certification level at the HRD Antwerp Institute of Gemmology at the Antwerp World Diamond Centre
Photograph by Yves Herman — Reuters

Private equity firm Lion Capital has quietly acquired Spence Diamonds, a 27 year-old Canadian diamond retailer known for an inventory-light business model in which most of the showroom goods are actually cubic zirconia.

Word is that the deal was valued at $125 million — all equity, including a minority co-investment from IVEST Consumer Partners — with company founder Sean Jones to retain an ownership position and board seat.

The basic investment strategy for Spence around is growth, with expectations that Spence Diamonds can expand from its current seven stores to upwards of 20 in Canada (further expansion into U.S. is possible, but it’s a much more saturated market). Expect that expansion capital could come from new loans (the company doesn’t have any debt on the books) rather than from extra working capital from its PE sponsors.

Consumer-focused Lion Capital has experience in this space before, with partner Lyndon Lea having served on the board of New York-based jeweler Harry Winston. Lea declined to discuss deal price when reached by phone, but did highlight Spence’s high conversion rates.

“Buying a diamond can be a terrifying experience, but Spence has this amazing 30% conversion rate,” Lea explains. “What they basically say to consumers is: ‘Put us in the list of your three top choices for where to buy a diamond, and we think we’ll win your business.'”

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