Zale Corporation acquired by Signet Jewelers

Signet Jewelers completed the acquisition of Zale Corporation on 29 May 2014 at an enterprise value of $1–10bn, following approval by a majority of the target’s shareholders. The consideration was settled in cash and funded through a receivables securitisation facility, senior unsecured notes, a bank term loan and internal resources, at a weighted average initial rate of approximately 2.60%. Zale Corporation retails fine jewellery across North America through shopping-centre stores under the Zales and Gordon’s names in the United States, Peoples and Mappins in Canada, and mall kiosks under Piercing Pagoda. It operated more than 1,600 locations, and the enlarged group reached over 3,600 with pro forma revenue of 6.2 billion dollars. Purchasing provided the largest part of the expected benefit. A retailer buying diamonds and gold at twice its previous volume obtains them at better terms, and half of the 100 million dollars in annual synergies anticipated by the end of the 2018 financial year were attributed to sourcing, the remainder to repair services, cross-selling between the brands and administrative costs. The two companies occupied adjacent positions in the same shopping centres, the acquirer’s names addressing a slightly higher price point than the acquired ones, which allowed the brands to be retained separately rather than consolidated. Theo Killion continued as president and chief executive of the acquired division, which was operated separately within the group, while Mark Light was promoted to president and chief operating officer of the acquirer and George Murray appointed to direct the integration. The transaction was expected to add a high single-digit percentage to earnings in the first full financial year following completion, excluding acquisition accounting adjustments and transaction costs.