Signet Jewelers Ltd (NYSE:SIG) (LON:SIG), the largest specialty retail jeweler in the United States and United Kingdom, agreed to acquire Zale Corporation (NYSE:ZLC), a leading specialty retailer of fine jewelry in North America for $21 per share in cash or approximately $690 million.

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Transaction details

According to Signet Jewelers Ltd (NYSE:SIG) (LON:SIG), the proposed $21 per share acquisition price represents a 41% premium to the closing price of the shares of Zale Corporation (NYSE:ZLC) yesterday, February 18.

The transaction is estimated to have an enterprise value of approximately $1.4 billion including stock price and debt. Signet Jewelers Ltd (NYSE:SIG) (LON:SIG) entered into a voting and support agreement with Golden Gate Capital, the beneficial owner of approximately 22% of all the common stock of Zale Corporation (NYSE:ZLC) as part of the deal.

Signet Jewelers CEO Mike Barnes will lead the combined company while Zale’s CEO Theo Killion will continue to supervise the operations of the fine jewelry specialty retailer as a separate business. He will report to Barnes.

Signet Jewelers Ltd (NYSE:SIG) (LON:SIG) is expected to fund the transaction through bank debt, other debt financing, and securitization of a significant portion of its accounts receivable portfolio. The transaction is subject to the approval of the shareholders of Zale Corporation (NYSE:ZLC), regulatory approvals, and customary closing conditions.

CEO statements

In a statement, Signet CEO Barnes said, “This transformational acquisition further diversifies our businesses and extends our international footprint, opening the door to greater growth and innovation across the enterprise. 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.”

On the other hand, Zale CEO Killion stated, “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.”

According to Signet Jewelers Ltd (NYSE:SIG) (LON:SIG), J.P. Morgan Chase Bank made a commitment to provide bridge financing for the transaction. J.P. Morgan Securities served as Signet’s financial adviser and Weil, Gotshal & Manges as legal counsel. Bank of America Merrill Lynch and Cravath, Swaine & Moore served as financial adviser and legal counsel for Zale Corporation (NYSE:ZLC), respectively.