Signet Jewelers is in the process of acquiring all issued and outstanding stock of Zale for $21 per share in cash consideration. The transaction brings together two leading jewelry retailers with six brands available across three countries with combined sales of $6.2 billion.
The acquisition is expected to generate approximately $100 million in annual synergies within three fiscal years. It also strengthens Signet's omnichannel presence since it will now be able to leverage stand-alone brands that include Kay Jewelers, Jared the Galleria of Jewelry, H.Samuel, Ernest Jones, Zales and Peoples.
"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, Signet's CEO. "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."
"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," added Killion.
Signet's offer represents a premium of 41% over Zale's closing price as of Feb. 18. The transaction would be valued at approximately $1.4 billion. 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 also subject to Zale stockholder approval, certain regulatory approvals and customary closing conditions.
J.P. Morgan Securities LLC acted as exclusive financial adviser 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 adviser and Cravath, Swaine & Moore LLP acted as legal counsel to Zale in connection with the transaction.