Signet Jewelers (SIG) to Acquire Zale (ZLC) for $21/Share

February 19, 2014 7:04 AM EST
(Updated - February 19, 2014 7:25 AM EST)

Signet Jewelers Limited (NYSE: SIG) and Zale Corporation (NYSE: ZLC) announced that they have entered into a definitive agreement for Signet to acquire all of the issued and outstanding stock of Zale for $21.00 per share in cash consideration.

"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, Signet's Chief Executive Officer. "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. In addition, it allows us to better optimize our balance sheet, creating long-term value for our shareholders. We are excited about the prospects for the combined company and the many opportunities that this creates for our future. I am happy to say it is our intention that Zale will continue to run under current leader CEO, Theo Killion, who would report directly to me after the transaction closes."

The acquisition strengthens Signet's omni-channel presence with some of the most recognizable jewelry store brands in the world, each operating as stand-alone brands including: Kay Jewelers, Jared The Galleria Of Jewelry, H.Samuel, Ernest Jones, Zales, and Peoples.

"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," commented Killion.

Signet's offer represents a premium of 41% over Zale's closing price as of February 18, 2014. The transaction would be valued at approximately $1.4 billion, representing an enterprise value to last twelve months Oct-13 Adjusted EBITDA(1) multiple of 7.4x(2). As part of the transaction, Signet has entered into a voting and support agreement with Golden Gate Capital, the beneficial owner of approximately 22% of Zale's common stock. The transaction is expected to be high single-digit percentage accretive to earnings in the first full fiscal year after the close of the transaction, excluding acquisition accounting adjustments and one-time transaction costs.

The acquisition is expected to be financed through bank debt, other debt financing and the securitization of a significant portion of Signet's accounts receivable portfolio.

The transaction is subject to Zale stockholder approval, certain regulatory approvals and customary closing conditions.

J.P. Morgan Securities LLC acted as exclusive financial advisor and provided a fairness opinion to the board of directors of Signet and J.P. Morgan Chase Bank, N.A. committed to provide bridge financing for the transaction. Weil, Gotshal & Manges LLP acted as legal counsel to Signet in connection with the transaction. BofA Merrill Lynch acted as exclusive financial advisor and Cravath, Swaine & Moore LLP acted as legal counsel to Zale in connection with the transaction.


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