Signet is paying a premium of 41% over Zale’s Tuesday closing price. Golden Gate Capital, owner of 22% of Zale’s stock, has agreed to support the acquisition. Signet expects to finance the deal with debt and the “securitization of a significant portion of Signet’s accounts receivable portfolio.” The transaction must be approved by Zale stockholders and make it through the usual regulatory approvals.
Zale stock collapsed from around $28 a share in mid-2008 to just over $1 a share after the company, which was strapped for cash, canceled orders and asked vendors to purchase inventory to boost the firm’s cash stock. Zale sold its Bailey Banks & Biddle chain and closed hundreds of stores. The share price began rising about a year ago and has now recovered more than $10 a share, though it is still well below its all-time high of $34 set in July 2005.
Shares of Zale were up more than 40% at $20.93 in premarket trading Wednesday. The stock’s 52-week range is $3.76 to $17.16.
Signet shares also traded higher, up 12.2% to $89.10, in a 52-week range of $58.85 to $81.28.