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Signet Jewelers Buying Zale For About $900M

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(Photo by Bruno Vincent/Getty Images)

(Photo by Bruno Vincent/Getty Images)

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DALLAS (CBSMiami/AP) — Two well-known diamond sellers are getting hitched and it’s worth about $900 million.

Signet Jewelers, who operates  under the names Kay Jewelers and Jared The Galleria of Jewelry in the U.S., announced Wednesday it agreed to buy Zale Corp. for roughly $900 million to help it expand in North America.

Shares of Zale soared more than 40 percent in premarket trading Wednesday, while Bermuda-based Signet Jewelers Ltd.’s stock rose more than 9 percent.

Signet, which operates 1,400 stores in the U.S. and 500 stores in the U.K. under the names H. Samuel and Ernest Jones, said it will pay $21 per share. That’s a 41 percent premium to Zale’s $14.91 Tuesday closing price.

Dallas-based Zale, which operates 1,680 stores in North America under names including Zales, Gordon’s and Peoples, among others, has about 32.9 million outstanding shares, according to FactSet.

Also part of the deal is about 11.1 million in warrants, a security issued by a company that gives the holder the right to buy securities, owned by Golden Gate Capital, a 22 percent stakeholder in Zale. Signet entered into a voting and support agreement with Golden Gate.

The companies value the deal at $1.4 billion. Excluding the roughly $500 million in debt Zale had as of Oct. 31, according to SEC filings, the deal is worth about $900 million.

Zale returned to a profit in its most recent fiscal year, which ended July 31. More recently the chain reported its holiday sales in stores open at least one year, a key retail metric, rose 2 percent during November and December. Meanwhile, Signet reported the key figure rose 5 percent during the same period.

The acquisition still needs approval from Zale shareholders. Theo Killion is expected to remain Zale CEO. Killion said in a statement that the move will help accelerate growth, coming afterZale completed its “multi-year turnaround program to return to profitability.”

The deal is expected to add to Signet earnings by a high single-digit percentage rate in the first full fiscal year after the transaction closes, excluding some costs.

Signet shares rose $10.48, or 13.2 percent, to $89.77 in premarket trading. The stock has edged up less than 1 percent since the beginning of the year.

Zale shares jumped $6.02, or 40.4 percent, to $20.94 in morning trading. Its stock had been down about 6 percent this year.

TM and © Copyright 2014 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2014 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report

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