Signet Jewellers to buy smaller rival Zale Corp for $690 mn

Britain's Signet Jewellers Ltd, the world's largest specialty retail jeweller, yesterday struck a deal to buy its smaller rival Zale Corporation in a $690 million deal.

Signet, which is based in Bermuda but has its headquarters in London, is paying $21 in cash for each Zale share, a 41 per cent premium over Tuesday's closing price. The total deal value is around $1.4 billion, including debt.

Signet said it has entered into a voting and support agreement with Golden Gate Capital, which holds around 22 per cent of Zale's common stock.

Signet expects the acquisition to be financed through bank debt, other debt financing and the securitisation of a significant portion of Signet's accounts receivable portfolio.

The combined company will operate more than 3,500 retail locations.

Signet said the acquisition will strengthen its omni-channel presence with some of the most recognisable jewellery store brands in the world, each operating as stand-alone brands, including Kay Jewellers, Jared The Galleria Of Jewellery, H Samuel, Ernest Jones, Zales, and Peoples.

''This transformational acquisition further diversifies our businesses and extends our international footprint, opening the door to greater growth and innovation across the enterprise," said Mike Barnes, CEO of Signet.

"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,'' he added.

Texas-based Zale is a leading specialty retailer of diamond and other jewellery products in North America, operating approximately 1,680 retail locations throughout the US, Canada and Puerto Rico, as well as online.

Zale's brands include Zales Jewellers, Zales Outlet, Gordon's Jewellers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Zale also operates five web stores.

In the fiscal year ended 31 December 2013, it posted revenue of $1.89 billion. Zale returned to profitability in fiscal 2013, posting $10 million in net earnings or $0.24 per diluted share, its highest net earnings since fiscal 2007.

Signet is the largest specialty jewellery retailer in the US and the UK. Its US division operates over 1,400 stores in all 50 states, primarily under the name brands of Kay Jewellers and Jared The Galleria Of Jewellery.

Signet's UK division operates approximately 500 stores under the name brands of H Samuel and Ernest Jones.

The company derives its annual sales of around $4 billion from the retailing of jewellery, watches and associated services.