Signet’s £840million acquisition of North American jewellery and watch retail chain Zales has been completed in a move that will see group sales push $6.2 billion (£3.7bn).
The acquisition was made at $21 per share in cash, a total consideration of $1.46 billion, following the approval of the transaction by a majority of Zale’s stockholders at the Zale special meeting held earlier today.
Following the purchase, Signet now operates over 3,600 retail locations in the UK, US and Canada under the names Kay, Jared, and Zales in the US; H Samuel and Ernest Jones in the UK; and People’s in Canada. Signet also now operates kiosks in the US under the brand Piercing Pagoda.
Signet chief executive officer Mike Barnes said: "Having now closed the acquisition of the Zale Corporation, we have entered a new era of growth and transformation for our company and our people. I am truly excited to have the Zale team joining the Signet family and I, and our leadership team, look forward to building upon the strengths of the entire organisation."
Signet said the transaction is expected to be a high-single-digit percentage accretive to earnings in the first full fiscal year after the close of the transaction, excluding acquisition accounting adjustments and one-time transaction costs.
A statement from Signet said: "Signet’s expertise, capital, and proprietary systems provide the opportunity for $100 million of synergy potential, currently estimated to be achieved by Fiscal Year-End 2018. These synergies are expected to result from $50 million of savings due to improved product sourcing and purchasing leading to cost improvement; $30 million of benefit split between repair services sales and margin growth and incremental margin from brand cross-selling; and $20 million of selling general and administrative cost reduction".
Signet financed the transaction with a two-year asset backed accounts receivable securitization facility of $600 million (£358m); 10-year senior unsecured notes of $400 million (£238m); a five-year bank term loan of $400 million (£238m); and internal cash. Based on current levels of base interest rates for each of the financing transactions and an assumed credit-adjusted margin for Signet, initial interest on the financings is estimated at a weighted average rate per annum of approximately 2.60%.
In conjunction with the close of the acquisition, Signet announced a number of organisational changes to support the expansion of the business. Barnes added: "Vision 2020 is our road map for ongoing success and includes the strategic pillars: maximising our mid-market success, being best-in-bridal, creating a best-in-class digital eco-system, expanding our footprint, and building an organisation of the future by growing our people with purpose and passion; all in support of our core purpose of helping customers to Celebrate Life and Express Love."
Signet announced that effective immediately, Mark Light has been promoted to the newly-created position of president and chief operating officer of Signet Jewelers Limited. Signet’s UK managing director Sebastian Hobbs will now report directly to Light.
Theo Killion will continue in his role as CEO and will become the president and CEO of Zale, which includes Zales, Gordon’s, and Piercing Pagoda in the US, as well as Peoples and Mappins in Canada. In his continuing role, Killion will report directly to Mike Barnes. Under Mr. Killion’s leadership, Zale will continue to operate as a separate division under the Signet umbrella.
George Murray has become Signet’s chief integration management officer. Under the leadership of its integration teams, the process of integrating Zale can now move from the planning phase to the implementation phase.
Steve Becker, senior vice president of human resources for Sterling, has been promoted to chief human resource officer for Signet Jewelers Limited. Becker will report directly to Barnes and, in addition to his Sterling duties, now has functional responsibility for human resources in all areas of the business. Becker will focus on leveraging Company resources to build integrated human resource strategies and processes across the entire Signet enterprise.
In addition, Signet has announced an executive search for two Signet leadership positions: firstly a chief marketing and strategy officer who will work in partnership with executive leadership across the company to build and execute Signet-wide Marketing & Advertising and Digital Ecosystem strategies and Business Development initiatives.
The second role is for a chief information officer, who will have responsibility for the company’s combined information systems across all Signet divisions, assuring information technology solutions and investments are meeting the needs of the businesses and are aligned with company-wide priorities. Appointments to these positions will be announced in the future upon completion of the executive search process.