4B in deal that could bring Kay Jewellers to Canada
biggest diamond sellers including the owner of Canada Peoples Jewellers and Mappins have agreed to a multi million dollar marriage of convenience.
Sig tiffany and co australia net Jewelers Ltd. acquisition of Zale Corporation, a deal valued at US$1.4 billion including debt, is the latest sign of industry consolidation as chains and mom and pop shops increasingly battle online upstarts for customers. mid priced jewellers announced Wednesday they have entered into an agreement in which Signet will acquire all of its smaller rival issued and outstanding stock at US$21 in cash per share, a 41% premium over the closing price on the New York Stock Exchange a day earlier.
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Investors seemed to like the pairing as Zale stock rose more than 40% to close at $20.92 on the New York Stock Exchange impressive given that it hovered as low as $3.80 last March. Signet stock rose 18% Wednesday.
The combined company will generate approximately US$6 billion in sales and more than $700 million in EBITDA, and will have nearly 30,000 associates, Mr. Barnes said.
With Signet jewellery brands Kay and Jared, which are leaders in the mid priced and the upper mid priced segments, the addition of Zale equally mall friendly brands help us maximize our midmarket success, he said.
The new company is also expected to see $100 million in synergies by the third year of operation, in large part due to stronger buying power and cost improvements, Signet executives said on the conference call.
The Zale brand will operate as a separate standalone division within Signet, led by Zale chief executive Theo Killion.
This acquisition, subject to shareholder approval, would cap what has been a tumultuous run over the years for Zale, and Peoples Jewellery.
Peoples was founded in Toronto 1919 by the Gerstein family, which grew the business over the following decades into a chain of jewellery stores with as many as 280 locations by the 1980s.
In 1986, Peoples teamed up with Switzerland Swarovski Intern tiffany and co australia tiffany and co australia rong>ational to swing the junk bond financed US$650 million purchase of Zale, which at the time was a firm more than five times its size. In 1989, the company later bought Gordon Jewelry Corp for US$311 million.
But after recession hit in the early 1990s, combined with high interest payments, Zale was pushed to the brink, filing for bankruptcy in 1992.
Many years later, consolidation in the jewellery industry at all price points continues, said David Wu, luxury goods analyst at Telsey Advisory Group in New York.
Hamilton, Bermuda based Signet had previously discussed buying Zale but those talks ended in 2006 after Zale board decided to stay independent, according to Bloomberg.
After Zale saw slumping sales in recent years, it embarked on a multi year restructuring which is to bear fruit said Mr. Wu, drawing a suitor.
Zale Corp. holiday sales results showed overall comparable store sales up 2%, with Zales branded stores up 4.4% tiffany and co australia and Peoples performing strongly at 2%. Mappins, however, saw sales drop more than 6%.
Mr. Wu said the deal potentially allows to roll out its brands north of the border and providing Zale with access to in class management.
really gives Signet an entry way into the Canadian market, he said. wouldn be surprised if Signet uses some of the real estate it currently has in Canada and potentially convert some of the underperforming Mappins stores into potentially a Kay store or a Jared store which I think would be very well received. files from Bloomberg