Early merger talks between Zale Corp., Signet Group are ‘terminated’

Preliminary talks about a possible merger between the Signet Group and Zale Corp.–the world’s two largest jewelry retailer groups–ended on June 12, a day after the talks were revealed by a London newspaper.

“The preliminary discussions have been terminated,” JCK was told personally by Walker Boyd, Signet Group Finance Director in a transatlantic call. “We acknowledge we had some discussions about a possible merger, but these talks have ended and gone no farther.”

Signet also released a brief statement to the financial wire services saying the same thing in the evening of a day of speculation about what a possible merger between the two jewelry retail giants might entail. The statement didn’t state why the talks had ended.

“It was appropriate to inform the [stock] market,” Boyd told JCK, but we won’t go into the issues of why or why not the talks ended. That should be left between the two companies.”

The talks between Signet and Zale were originally reported June 11, without attribution, in Britain’s Mail on Sunday newspaper. Shortly after that, Signet’s board of directors issued a brief statement confirming the report. It said that, following “press speculation,” the Signet Group “confirms that it has held preliminary discussions with Zale Corporation regarding a possible merger. However, at this early stage, there is considerable uncertainty as to whether any transaction will be forthcoming.”

Even so, that announcement caused stock shares of both companies to rise on Monday, June 12. Some industry analysts, reported Reuters UK, speculated that if a merger went through, Signet might re-list itself as a U.S. company on the New York Stock Exchange and “spin off its UK operations.” Over two-thirds of Signet’s revenues come from Sterling Inc., headquartered in Akron, Ohio, its U.S. operation. Signet’s chairman is American Terry Burman, who formerly led Sterling Inc.

The Mail on Sunday report claimed it was Zale Corp. that approached Signet a few months ago.

Zale has had a bumpy year. Its board of directors ousted former president and chief executive Mary Forte in January after months of disappointing sales and earnings and falling market share, and named board member Betsy Burton as interim chief executive. Other veteran Zale execs who have resigned since then are Paul Leonard, Zales Jewelers division president, in February, and Sue Gove, chief operating officer, in March.

In April, the Securities & Exchange Commission, announced it hadinitiated a non-public investigation relating to various accounting practices and other matters related to the company, including accounting for extended service agreements, leases, and accrued payroll.

In May, Zale put chief financial officer Mark Lenz on indefinite administrative leave.

Zale Corp. is North America’s largest specialty retailer of fine jewelry, with 2,345 retail locations throughout the United States, Canada and Puerto Rico. It represents about 7.8 percent U.S. market. Its diversified portfolio covers all major price points and categories of retail jewelry, from popular to high luxury. Its brands include Zales Jewelers, Zales Outlet, Gordon’s Jewelers, Bailey Banks & Biddle, Piercing Pagoda and (in Canada) Peoples Jewellers and Mappins Jewellers. Through its ZLC Direct organization, Zale also operates online at www.zales.com and www.baileybanksandbiddle.com.

The Signet Group is the world’s largest specialty retail jeweler with operations in the United States (Sterling Inc., the second-largest North American specialty retail jeweler) and the United Kingdom. Its primary focus is on the middle market jewelry sector.  Signet has 1,837 stores, of which 1,246 are operated in the United States by Sterling Inc., under the names of “Kay Jewelers,” “Jared The Galleria Of Jewelry,” and under a number of regional names. It claims 8.2 percent of the U.S. market. The other 591 stores are in the United Kingdom, where they trade under the names “H. Samuel,” “Ernest Jones,” and “Leslie Davis.”