Hamilton, Bermuda - In a deal that would combine the two largest mid-tier jewelry chains in the United States, Signet Jewelers Ltd. has agreed to buy rival Zale Corp. The total estimated value of the deal is about $1.4 billion. Signet will offer $21 in cash for each Zale share, representing a 41% premium over Tuesday's closing price.
"This transformational acquisition further diversifies our businesses and extends our international footprint, opening the door to greater growth and innovation across the enterprise," stated Mike Barnes, CEO, Signet Jewelers, whose U.S. operations are based in Akron, Ohio.
Signet operates over 1,400 stores in all 50 states, primarily under the banners of Kay Jewelers and Jared The Galleria Of Jewelry. It is also the largest jewelry retailer in the United Kingdom, where it operates about 500 stores.
Zale, which is coming off a successful multi-year turnaround effort, operates some 1,680 stores throughout the United States, Canada and Puerto Rico. Zale’s brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.
Signet said it plans for Zale Corp. to continue to be run by Zale CEO Theo Killion, who would report directly to Signet CEO Mike Barnes.
Signet said the enhanced operating capabilities resulting from the acquisition are expected to generate about $100 million in synergies within the first three years, and contribute in the high, single-digit percentages to profits within the first fiscal year, excluding the costs of the transaction.
The acquisition, which is subject to Zale stockholder approval, will be financed through debt and the securitization of a significant portion of Signet's accounts receivable portfolio.
As part of the transaction, Signet said it entered into a voting and support agreement with Golden Gate Capital, the beneficial owner of about 22% of Zale's common stock.