Whitehall enters into merger agreement with Prentice

Whitehall Jewellers, Inc. said Thursday that it reached an agreement with Prentice Capital Management, LP and Holtzman Opportunity Fund, L.P. to acquire the Chicago-based retail jeweler.

Prentice and Holtzman will begin a cash tender offer for all outstanding shares of Whitehall common stock at $1.60 per share on Feb. 8 for a minimum of 20 days, , Whitehall said in a statement. Any shares not purchased in the offer will be acquired for the same price in cash in a second-step merger.

Prentice and Holtzman were competing with Newcastle Capital Management for ownership of Whitehall. The Board of Directors of Whitehall said after consulting the company’s financial and legal advisors, it concluded that the Newcastle proposal was no longer a “Superior Proposal” in light of the revised Prentice transaction.

In connection with the merger agreement, the parties are terminating the securities purchase agreement previously entered into with Prentice and Holtzman. The special meeting of stockholders that was previously postponed to Feb. 6 has been cancelled.

The Jan. 31, 2006 maturity of Whitehall’s bridge term loan credit agreement is being extended for three years, in connection with the merger agreement, and the lenders are making an additional $20 million loan to Whitehall for working capital and general corporate purposes. On Feb. 1, 2006, Whitehall was in default under its senior credit agreement. However, Whitehall’s senior lenders are waiving these defaults and consenting to the extension of the bridge term loan maturity date and the making of the additional $20 million loan described above. The senior lenders also are reinstating $10 million in availability under the credit facility.

Whitehall Jewellers currently operates 366 stores in 38 states, but has announced that it intends to close a number of stores in the near term. The company operates stores in regional and super regional shopping malls under the names Whitehall Co. Jewellers, Lundstrom Jewelers and Marks Bros. Jewelers.