It looked dicey for a while, but Signet Jewelers’ acquisition of Zale Corp. is now a done deal.
The takeover was completed May 29, after Zale shareholders okayed it in a close vote at the Dallas headquarters, with 53 percent of investors deciding in favor. The approval means Signet operates 3,600 stores in the United States, United Kingdom, and Canada, representing $6.2 billion in annual revenue.
A month later, Zale CEO Theo Killion, who had been expected to stay on, announced his resignation. He will be replaced by ex–Signet marketing VP George Murray, who will become president of the Zale division, which includes Zales, Gordon’s, Piercing Pagoda, and Zale Canada. He will work out of Zale’s Dallas headquarters.
Other Zale execs resigning: chief administrative officer Matt Appel; chief marketing officer Richard Lennox; chief merchandising and sourcing officer Gil Hollander; Richard Golden, senior vice president, real estate; and senior vice president and chief stores officer Becky Mick. CFO Thomas Haubenstricker and some other Zale execs will stay on.
Mark Light, ex-president and CEO of Sterling, has been promoted to president and chief operating officer of Signet; he’ll now oversee the U.K. and Zale divisions. He reports to CEO Michael Barnes. Ed Hrabak will replace him as president of Sterling, which oversees Kay, Jared, and Signet’s U.S. regional chains.
Officials at Signet have enlisted consulting firm McKinsey & Co. to help with integrating Zale. In a conference call before the vote, Signet chief financial officer Ronald Ristau, who is also resigning, indicated the new owners were willing to invest as much as $80 million a year to rehabilitate Zale. “There is a lot of rebuilding work that has yet to be done,” he said, citing Zale’s infrastructure, stores, and inventory management system, “and a lot of money that needs to be invested…to drive it.”
In the weeks leading up to the vote, the deal came under spirited assault from investment firm TIG Advisors LLC, which tried to rally other shareholders against it, complaining that Signet’s $21-per-share offer undervalued the company and the process was riddled with conflicts of interest. In the face of TIG’s daily attacks, Zale’s board countered, claiming that Zale has underperformed sales expectations and that no other company had expressed interest in its purchase.
And while a few investors defected, enough of the large institutional funds came through that the “yea” votes carried the day. Even so, the takeover still faces a few remaining legal challenges, including five shareholder suits that have been consolidated into one class action in the Delaware Court of Chancery. Although a judge denied attorneys’ requests to halt the merger the weekend before it occurred, they could ask the court for further damages or even ask the merger be rescinded. Additionally, according to a Reuters report, three investment funds, which own 26 percent of Zale’s stock, are likely to ask to petition the court for appraisal rights, which would have the court or an independent auditor rule on the merger’s value. Signet and Zale have called the suits “without merit.”
