Signet to Acquire Rival Zales in $1.4B Stock Deal

HAMILTON, BERMUDA and IRVING, TX-Already the largest specialty jewelry retailer in the US with brands such as Kay and Jared, Signet Jewelers Ltd. will nearly double its store count when its $1.4-billion acquisition of rival Zale Corp. closes. The definitive agreement, announced Wednesday, calls for Signet to buy up Zale's stock for $21 per share, a 41% premium on Zale's closing price Tuesday afternoon.

"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 and new opportunities for our employees, and makes us a more attractive partner to our vendors," says Signet CEO Mike Barnes. Zale's current, CEO, Theo Killion, will continue running the Zale business, reporting to Barnes.

Along with increasing Hamilton, Bermuda-based Signet's stable of 1,900 retail locations in the US and UK by nearly 1,700 across North America, the deal adds brands including Gordon's Jewelers and Piercing Pagoda as well as Zales to the Signet roster. Signet expects to finance the deal through a combination of bank debt, other debt financing and the securitization of a significant portion of Signet's accounts receivable portfolio.

The acquisition comes as demand for jewelry is on the upswing, Bloomberg reported Wednesday. The category was among the strongest during the holiday season, according to MasterCard Advisors SpendingPulse.

J.P. Morgan Securities LLC acted as exclusive financial advisor to Signet's board, while J.P. Morgan Chase Bank N.A. committed to provide bridge financing. Weil, Gotshal & Manges LLP acted as legal counsel to Signet in connection with the transaction. For Irving, TX-based Zale Corp., BofA Merrill Lynch served as exclusive financial advisor, and Cravath, Swaine & Moore LLP acted as legal counsel.