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Signet Jewelers buying Zale for about $900M

Published: Wednesday, Feb. 19, 2014 4:57 p.m. CST

DALLAS – Two diamond sellers are getting engaged.

Signet Jewelers said Wednesday it agreed to buy Zale Corp. for about $900 million to help it expand in North America.

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.

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