Zale Corp Shareholder Proposes No Vote to Signet Offer
May 11, 14
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Zale shareholders are due to vote on the merger on May 29 at a special meeting in Dallas.
“We believe the current offer price of $21 per share is grossly unfair to current shareholders,” said Drew Figdor, a TIG portfolio manager, in a statement. “Shareholders are not being paid a fair value for the margin expansion opportunity they already own, much less a premium.
“The transfer of value to Signet shareholders and the lopsided sharing of deal synergies could not be seen more clearly than by comparing the $1.4 billion of value accretion that Signet shareholders have enjoyed versus the $286 million premium paid for Zale shares. Said another way, Signet holders have benefited 5x the amount that Zale holders have.”
A TIG analysis of the proposed acquisition found that using Zale's 2016 base-case estimate, shareholders should receive $31 per share, while at the low end the figure would still be $25 share.
Zale and its financial advisors, used “stale” financial forecasts prepared some time before July 31, 2013 in evaluating the value of the acquisition to Zale's stockholders, TIG explained. "By our estimate, the $1.4 billion increase in Signet’s market capitalization on the date of the merger announcement compares to a $286 million premium paid for depressed Zale shares," the investment firm stated.
"We believe that BofA Merrill Lynch was conflicted and not in the best position to provide a fairness opinion on the proposed merger given its prior involvement with Signet. We question why BofA Merrill Lynch and not any of the numerous other nationally recognized investment banks were retained," TIG wrote.
Signet announced in February that it would acquire Zale Corp for $21 per share in cash, a price that was then a 41 percent premium over Zale’s closing price the day before with the deal worth $1.4 billion.