The Swatch Group has terminated its cooperation contracts with Tiffany & Co. due to the latter's alleged "systematic efforts to block and delay development of the business.”

In a statement, the Swatch Group said that together with Tiffany Watch Co. Ltd., it will press claims for damages against against Tiffany & Co., New York, “in compensation for the loss of planned long-term future business.”

The Swatch Group is the largest manufacturer of finished watches in the world while Tiffany & Co. is a premier jewelry and silverware company.

The Swatch Group said that within the framework of the long-term partnership agreement in spring 2008, it founded Tiffany Watch Co. Ltd., which was responsible for the development, production and distribution of Tiffany & Co. branded watches.

Worldwide sales were handled through points of sale operated by Tiffany & Co., by The Swatch Group Ltd and by independent retailers.

“Tiffany Watch Co. Ltd. will be permitted to wind down current business over the course of two years following effective termination of the cooperation contracts,” the Swatch Group said.

Kepler Capital Markets' analyst Jon Cox told Reuters that closing down the venture would cost around 20 million Swiss francs.

"In addition, the move will likely renew speculation of a Tiffany takeover given the Swatch Group watch deal was seen as a possible obstacle," Reuters quoted Cox as saying.

In December 2007, the Swatch Group and Tiffany & Co. announced a 20-year strategic alliance to further the development, production and worldwide distribution of Tiffany & Co. brand watches.

Under the agreement, the new watch company, known as Tiffany Watch Co. Ltd and wholly owned by Swatch Group, will design and manufacture in Switzerland a complete range of high-end luxury watches.

The parties said the enormous prestige of the Tiffany & Co. brand and the Swatch Group’s watchmaking expertise and experience in the luxury segment form a powerful platform on which to build one of the world’s top luxury watchmakers.

Tiffany Watch Co. Ltd is a Swiss company. Its products are designed and manufactured in Switzerland and distributed selectively through Swatch Group and Tiffany & Co. retail distribution networks, including monobrand Tiffany & Co. watch boutiques in certain markets outside the United States.