London jeweler Graff plans $1 billion HK IPO

London-based jeweler Graff Diamonds plans to raise about $1 billion in a Hong Kong listing next year, a move that could fund expansion in Asia and capitalize on booming gem prices.

The buyer last year of the 24.78 carat Graff Pink, Graff and its flagship Bond Street store are controlled by Britain's 13th richest man, septuagenarian Laurence Graff.

While most initial public offering (IPO) markets are virtually shut across the world due to uncertainties surrounding the euro zone debt crisis, Graff's pursuit of a Hong Kong listing shows companies in some sectors are still positioning themselves into the pipeline.

I can confirm we are considering our options with regard to a possible Hong Kong IPO, chief financial officer Nick Paine told Reuters on Thursday, after a source familiar with the deal said the IPO was in the pipeline and could raise $1 billion. Paine also confirmed plans for store openings in Asia. He declined further comment.

Laurence Graff began his career as a teenage apprentice in London's Hatton Garden jewelry quarter. He heads a firm that retails some of the world's most expensive jewelry.

With 33 stores worldwide it counts the Sultan and Queen of Brunei and American property mogul Donald Trump among clients, Forbes said.

The IPO plan follows a pattern of luxury brands flocking to list on the Hong Kong stock market as a platform for a broader expansion into China and beyond.

The diamonds business in Asia has been booming as consumers in China and India turn to diamond jewelry even in the face of a poor global economic outlook.

The two countries are expected by some analysts to overtake the United States in the next four years as the top diamond consumers -- growth that sits behind the move by miner Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) to buy out diamond industry goliath De Beers earlier this month.

Diamonds have been one of the best performing commodities this year, with rough diamond prices boosted by a dearth of new mines, low inventories at cutting centers and growing demand.

The investment community in Asia would welcome more luxury goods, and in this case, super luxury goods like Graff, said Aaron Fischer, Head of Consumer and Gaming at CLSA Asia-Pacific Markets.

Rothschild ROT.UL is advising Graff on the IPO, according to the source, who declined to be named as the plan is not yet public.

Hong Kong has been the top global destination for initial public offerings for two years, in part due to its access to Asian capital and markets. Italian fashion house Prada SpA (1913.HK: Quote, Profile, Research, Stock Buzz) this year sold shares in a Hong Kong IPO, raising around $2.5 billion.

Another top jewelry business, Hong Kong's largest jewelry retailer Chow Tai Fook -- controlled by Cheng Yu-teng, one of the city's wealthiest tycoons -- is expected to raise between $3 billion and $4 billion in an IPO early next year.

Laurence Graff, who resides in Gstaad, Switzerland, is also the controlling shareholder in Johannesburg-based diamond manufacturer and wholesaler the South African Diamond Corporation (SAFDICO).

BOOMING CHINA MARKET

The increasing spending power of China's consumers in recent years has seen consumption of luxury products surge at double-digit rates as increasingly brand-conscious shoppers splash out on designer bags from LVMH (LVMH.PA: Quote, Profile, Research, Stock Buzz), ties and scarves from Hermes International SCA (HRMS.PA: Quote, Profile, Research, Stock Buzz) and jewelry from Tiffany & Co (TIF.N: Quote, Profile, Research, Stock Buzz).

Despite fears of slowing growth in the country, the Chinese consumer -- boosted by an appreciating currency, rising affluence and government policies to spur consumption of disposable income -- is well-positioned to continue splurging.

CLSA Asia-Pacific Markets estimates the Chinese luxury market will have a market size of over $100 billion by 2020. Including travel spend, Greater Chinese demand is expected to account for 44 percent of the global luxury goods market by then.

At a time of global uncertainties, though, consumers are becoming more selective.

At a Sotheby's six-day Asian sale in Hong Kong in October, two rare colored diamonds -- a fancy vivid orange and fancy vivid blue diamond -- each made record prices per carat for their specific categories but the broader fine jewels sales saw an unsold rate of 21 percent for 359 pieces offered.

Christie's auction on 25-30 November in Hong Kong will be the next barometer of emerging market demand for some of the world's most expensive artwork and luxury goods.

Chow Tai Fook is a household name in Hong Kong and throughout greater China, with 1,400 retail outlets. It competes with domestic players Luk Fook Holdings (International) Ltd (0590.HK: Quote, Profile, Research, Stock Buzz), Chow Sang Sang Holdings International Ltd (0116.HK: Quote, Profile, Research, Stock Buzz) and Emperor Watch & Jewelry Ltd (0887.HK: Quote, Profile, Research, Stock Buzz), as well as foreign brands such as Tiffany & Co.