In this April 26, 2010 picture, flags wave in front of the headquarters of Swatch Group in Biel, Switzerland. THE CANADIAN PRESS/AP, Keystone/Martin Ruetschi

TORONTO - Switzerland's Swatch Group is buying the Harry Winston retail jewelry and watch division for US$1 billion in cash and assumed debt from a Canadian mining company, which says the deal will position it well to pursue other opportunities

The seller is Toronto-based Harry Winston Diamond Corp. (TSX:HW), which will be renamed Dominion Diamond Corp. after the deal closes.

"At the time that we purchased the Harry Winston brand, resource investment opportunities for diamonds were rare and expensive following the euphoria of the Canadian diamond discoveries, and the involvement of the large international mining companies," said Robert Gannicott, Harry Winston's chief executive.

"Today there is a range of diamond resource opportunities while the value of heritage luxury brands has increased dramatically. This transaction represents a sound return on our original investment."

Gannicott said the company's "upstream" mining business will be well-equipped "in an environment where cash has become a strategic resource while preserving and expanding our relationship with the downstream diamond business."

Swatch, the world's largest watch company, will pay Harry Winston $750 million and assume $250 million in debt owed by Harry Winston.

Harry Winston shares (NYSE:HWD) gained US$1.29 or nearly nine per cent to $15.75 in pre-open trading after the announcement.

Swatch says Harry Winston will complement the prestige segment of the Swiss group, which is one of the world's biggest makers of watches.

"We are proud and happy to welcome Harry Winston to the Swatch Group family _ diamonds are still a girl's best friend," said Swatch chairwoman Nayla Hayek.

Harry Winston had indicated previously that it had received "various indications of interest" for the retail business.

The mining company had been called Aber Diamond Corp. until it acquired the Harry Winston retail business in two stages in 2004 and 2006.

As Harry Winston Diamond, the Toronto-based mining company had adopted an integrated strategy that included mining, polishing and retailing of the precious stones.

However, the company has recently moved to increase the mining portion of its business by acquiring BHP Billiton's diamonds business, including its stake in the Ekati diamond mine in the Northwest Territories for US$500 million in cash.

Under the deal, BHP Billiton's employees working at Ekati, in Yellowknife and in diamonds marketing in Antwerp, Belgium, will join Harry Winston.

Swatch and Harry Winston said Monday they would explore opportunities for a joint diamond polishing operation.

News from © The Canadian Press, 2013