Hamilton, Bermuda and Dallas—While it may not come close to the proposed $45 billion Comcast/Time Warner Cable, two retail jewelry rivals plan to merge in a deal that could create a 3,600-store company with sales of $6.2 billion.
Signet Jewelers, which operates Kay Jewelers and Jared the Galleria of Jewelry, said today it will pay $21 a share for Zale Corp., owner of Zales, Gordon’s and Piercing Pagoda. The offer is valued at about $1.4 billion, some 41% above Zale’s closing price of $14.91 on Monday.
Signet’s acquisition of Zale and its retail brands would significantly expand Signet’s North American presence with the most recognizable names in the middle market of U.S. fine jewelry. According to IBISWorld, the combined Signet and Zale retail operations will account for about 15% of the specialty jewelry market.
“This transformational acquisition further diversifies our businesses and extends our international footprint, opening the door to greater growth and innovation across the enterprise,” said Mike Barnes, chief executive at Signet. “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.” Indeed the expanded company is expected to be profitable its first year.
Barnes also said that Zale CEO Theo Killion would continue in his position, answering to Barnes after the transaction closes.
“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,” Killion said of the acquisition.
Interestingly, Terry Burman, former chief executive at Signet and how chairman of Zale’s board of directors, had once tried to merge the two retail jewelry giants back in the mid 2000s.
Golden Gate Capital, the private equity firm that invested $150 million into Zale in 2010 to help it turnaround, stands to receive a major payback on the 22% of Zale’s shares it owns.