In light of investment firm TIG Advisors declaring the pending acquisition of Zale “unfair” to shareholders, company management is urging investors to vote for the deal, noting its vaunted turnaround may not have been able to achieve its goals.
A Zale statement warns investors that in the nearly three months since Signet’s acquisition was announced, no other parties have expressed interest in acquiring the 1,600-store retailer.
In contrast to most investor materials, a presentation posted by the company on May 15 studiously talks down the company’s future prospects, calling its three-year business outlook, repeatedly cited by TIG in its filing, a “stretch plan” that faced “significant risk and uncertainty” because of macroeconomic factors, commodity prices, and the company’s “highly leveraged capital structure” and “aging infrastructure.”
It says that, prior to signing the deal, revenues came in below plan, while operating profits were in line with plan, due to favorable commodity prices.
It argues that Signet’s all-cash acquisition eliminates further risks and warns of a possible “material decline in the company’s share price if the transaction does not close.”
The company rejected two previous Signet offers of $19 and $20.50 before settling on the current $21 per share offer, it says, adding that price represents a 41 percent premium on Zale’s share price the day prior to the deal’s announcement and 85 percent premium over its average closing price in the prior year.
While TIG claims the sale process evidenced several conflicts of interest, Zale counters its board, which voted unanimously in favor of the deal, is “strong and independent,” and says that the interests of 23 percent shareholder Golden Gate align with investors’.
TIG has urged shareholders to reject the deal or at least withhold their vote. The vote on the $1.4 billion deal is due to take place May 29.
In a May 13 release, TIG said it “is encouraging to learn just how many other stockholders share a similar view regarding Signet’s inadequate offer.… [D]espite our repeated attempts at engagement from Zale management, we are yet to receive a constructive response.”