Signet Jewelers to Buy Zale in $690 Million Deal

The specialty jewelry retailer Signet Jewelers Ltd. said Wednesday that it would acquire its smaller rival Zale Corporation in a deal that significantly expands its business in the United States.

Signet, which is based in Bermuda, operates more than 1,400 stores in the United States under the Kay Jewelers and Jared The Galleria Of Jewelry brand names. It also operates about 500 stores in Britain under the brands H.Samuel and Ernest Jones.

As part of the deal, Signet has agreed to pay $21 a share in cash for Zale’s outstanding shares, or about $690 million. That represents a 41 percent premium from Tuesday’s closing price. The companies said the deal represents an enterprise value, which includes debt of $1.4 billion.

“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, the Signet chief executive. “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.”

The transaction is subject to regulatory and shareholder approval.

As part of the deal, Golden Gate Capital, the beneficial owner of about 22 percent of Zale’s common stock, has agreed to support the deal.

Golden Gate Capital loaned $150 million to Zale in 2010 in exchange for a stake in the company. Zale was hit hard by the financial crisis and has been in the midst of a turnaround.

Zale operates more than 1,000 stores in the United States, Canada and Puerto Rico under the Zales, Gordon’s and Peoples brand names. In the fiscal year ended July 31, it posted revenue of $1.89 billion.

By comparison, Signet had sales of $3,98 billion in 2012.

The transaction will be financed through debt, Signet said.

JPMorgan Chase advised Signet, while Bank of America Merrill Lynch acted as the financial adviser to Zale. The legal advisers were Weil, Gotshal & Manges for Signet and Cravath, Swaine & Moore for Zale.