Economy

Signet Jewelers buying Zale for about $900M

DALLAS (AP) — 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 percent in premarket trading Wednesday, while Bermuda-based Signet Jewelers Ltd.'s stock rose more than 9 percent. 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 percent 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 percent 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 percent during November and December. Meanwhile, Signet reported the key figure rose 5 percent 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 percent, to $89.77 in premarket trading. The stock has edged up less than 1 percent since the beginning of the year.

Zale shares jumped $6.02, or 40.4 percent, to $20.94 in morning trading. Its stock had been down about 6 percent this year.

Related Headlines

  • Virgin America

    Virgin America files plans for IPO

    Virgin America's next destination is Wall Street. The California-based airline filed on Monday for an initial public offering of shares. Virgin America Inc., which operates ... 

  • Actavis to buy Forest Labs in $25 billion deal

    Irish drugmaker Actavis PLC plans to buy Forest Laboratories Inc. for about $25 billion, catapulting little-known Actavis into the world's No. 15 drug company, with an unusual ... 

  • Ukraine tensions roil markets, Amazon disappoints

    Fears of a further escalation in Ukraine and a disappointing earnings statement from Amazon roiled global markets Friday. Stocks around the world fell sharply as Russia's ...