Fossil to make watches for Guess

CHICAGO (MarketWatch) — Fossil Inc. shares rallied better than 10% Friday after the watchmaker said it’s in advanced discussions with Guess Inc. that could lead to a 10-year deal to make and sell timepieces under the apparel company’s brand.

For more than two decades, Guess watches have been made by a Timex division called Callanen.

Under the new pact, Fossil
would receive royalties on watch sales projected at $1.36 billion over the life of the partnership, the two companies said in a written statement. The agreement, which could be finalized by the end of next week, would begin in January 2007 and would include an option to renew.

Guess said its watch sales total about $150 million a year.

At the close, Fossil shares traded at $21.97, up $1.79.

Shares of Guess
which started the session higher, turned lower to finish down 34 cents, or 1.6%, to $21.60.

Richardson, Texas-based Fossil said it would form a separate company for the Guess business and would rely on its worldwide network to expand sales beyond the $150 million global business it is now.

Guess, based in Los Angeles, is an apparel and accessories brand sold at specialty retailers and department stores in North America.

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