Signet Jewelers To Buy Smaller Rival Zale In $1.4 Bln Deal

(RTTNews) - Specialty retail jeweler Signet Jewelers Ltd. (SIG.L, SIG) agreed Wednesday to acquire smaller rival Zale Corp. (ZLC) for $21.00 per share in cash in a deal valued at about $1.4 billion.

"This transformational acquisition further diversifies our businesses and extends our international footprint, opening the door to greater growth and innovation across the enterprise. The addition of Zale to the Signet family is consistent with our long-term growth strategy and leverages our combined operating expertise to create better choices for our customers, new opportunities for our employees, and makes us a more attractive partner to our vendors," Signet CEO Mike Barnes said.

The offer represents a 40.8 percent premium over Zale's closing price of $14.91 on Tuesday. The deal is expected to be funded through bank debt, other debt financing and the securitization of a significant portion of Signet's accounts receivable portfolio.

The closure of the deal is primarily subject to Zale stockholder approval, certain regulatory approvals and customary closing conditions. Meanwhile, Golden Gate Capital, the beneficial owner of about 22 percent of Zale, has agreed to vote its shares in favor of the deal.

Following the closure of the deal, Irving, Texas-based Zale will continue to be run by its current CEO Theo Killion, who would report directly Barnes.

"Having successfully completed our multi-year turnaround program to return to profitability, Signet's operating strengths will enable us to accelerate Zale's performance improvement for the benefit of our current and future guests," Killion stated.

The deal is expected to add to Signet's earnings in the high single-digit percentages in the first full fiscal year after closure of the deal, excluding acquisition accounting adjustments and one-time transaction costs.

The combined company is expected to generate annual sales of about $6.2 billion, as well as generate about $100 million in annual synergies within the first three fiscal years.

For Hamilton, Bermuda-based Signet Jewelers, Kay Jewelers parent, the deal will see the strengthening of its omni-channel presence with a portfolio of leading global jewelry store brands such as Kay Jewelers, Jared The Galleria Of Jewelry, H.Samuel, Ernest Jones, Zales, and Peoples, each of them operating as stand-alone brand. These are six of the most recognizable brands across three countries, the U.S., the U.K., and Canada.

J.P. Morgan Securities LLC acted as exclusive financial adviser and provided a fairness opinion to the board of directors of Signet.

SIG closed Tuesday's regular trading session at $79.27, down $0.40 on a volume of 1.03 million shares, while ZLC closed at $14.91, up $0.68 on a volume of 1.29 million shares.

Meanwhile, SIG.L is currently trading in Wednesday's regular trading session on the LSE at 5,495.00 pence, up 715.00 pence or 14.96% on a volume of 25,129 shares.