Signet Jewelers buying Zale for about $900M to help diversify its business
DALLAS - Two diamond sellers are getting engaged.
Signet Jewelers said Wednesday that it agreed to buy Zale Corp. for roughly $900 million to help it expand in North America.
Shares of Zale soared more than 40 per cent in premarket trading Wednesday, while Bermuda-based Signet Jewelers Ltd.'s stock rose more than 9 per cent.
Signet, which operates 1,400 stores in the U.S. under the names Kay Jewelers and Jared The Galleria of Jewelry and 500 stores in the U.K. under the names H. Samuel and Ernest Jones, said it will pay $21 per share. That's a 41 per cent premium to Zale's $14.91 Tuesday closing price.
Dallas-based Zale, which operates 1,680 stores in North America under names including Zales, Gordon's and Peoples, among others, has about 32.9 million outstanding shares, according to FactSet.
Also part of the deal is about 11.1 million in warrants, a security issued by a company that gives the holder the right to buy securities, owned by Golden Gate Capital, a 22 per cent stakeholder in Zale. Signet entered into a voting and support agreement with Golden Gate.
The companies value the deal at $1.4 billion. Excluding the roughly $500 million in debt Zale had as of Oct. 31, according to SEC filings, the deal is worth about $900 million.
Zale returned to a profit in its most recent fiscal year, which ended July 31. More recently the chain reported its holiday sales in stores open at least one year, a key retail metric, rose 2 per cent during November and December. Meanwhile, Signet reported the key figure rose 5 per cent during the same period.
The acquisition still needs approval from Zale shareholders. Theo Killion is expected to remain Zale CEO. Killion said in a statement that the move will help accelerate growth, coming after Zale completed its "multi-year turnaround program to return to profitability."
The deal is expected to add to Signet earnings by a high single-digit percentage rate in the first full fiscal year after the transaction closes, excluding some costs.
Signet shares rose $10.48, or 13.2 per cent, to $89.77 in premarket trading. The stock has edged up less than 1 per cent since the beginning of the year.
Zale shares jumped $6.02, or 40.4 per cent, to $20.94 in morning trading. Its stock had been down about 6 per cent this year.
Read more Business News
- Skeet range takes flackCentral Okanagan - 5:00 am
- No use for new taxi charge?Kelowna - 5:00 am
- PIB backtracks on BoonstockPenticton / S. Okanagan
- Missing hiker foundCentral Okanagan - 9:28 am
|QHR Technologies Inc||1.20||0.00|
|Anavex Life Sciences||0.251||-0.0165|
|Copper Mountain Mining||2.84||-0.02|
|Sunrise Resources Ltd||0.035||+0.015|
|Mission Ready Services||0.15||-0.005|
Photo: Thinkstock.comWays to reduce your Debt:Make a budget and get budget counselingA basic first step for debt reduction is to prepare a budget and plan your spending. Once you have a budget, you mu...
The Big Picture Geopolitical tensions rattle markets The spectre of rising geopolitical tensions in Ukraine and Gaza cast a shadow over an otherwise positive week in the markets. News that a passenger...
Photo: ContributedI have the pleasure of witnessing people delegate tasks quite often. Sometimes with tremendous success and sometimes with disastrous consequences. I have chaired a lot of committees...