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Signet UK Finance Secures $400M Underwriting Agreement

GAMCO to Vote Against Zale Acquisition

May 16, 2014 11:05 AM   By Jeff Miller
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RAPAPORT... Signet Jewelers Ltd.'s subsidiary, Signet UK Finance plc., priced an offering of a $400 million principal amount from its senior notes  due in 2024. The securities will be issued on May 19 and be fully and unconditionally guaranteed on a senior unsecured basis by Signet and  its subsidiaries. Signet UK Finance also agreed to indemnify the underwriters against certain liabilities, including civil liabilities under the U.S. Securities Act of 1933, as amended, or to contribute to payments that the underwriters may be required to make in respect of those liabilities.

The underwriting agreement was signed on May 14 with J.P. Morgan Securities LLC,  acting as a representative of several underwriters, including, Fifth Third Securities Inc., PNC Capital Markets LLC, HSBC Securities Inc. and RBS Securities Inc. in connection with the sale of the notes.

J.P. Morgan Securities agreed to a principal amount of $260 million, while Fifth Third Securities and PNC Capital Markets each agreed to $45 million and HSBC Securities and RBS Securities each agreed to $25 million.

On February 19, Signet entered into an acquisition agreement with Zale Corporation. Signet  intends to use the proceeds from this offering, together with proceeds from a term loan facility and a receivables facility, to finance the acquisition and pay related fees and expenses.

Zale scheduled a shareholder meeting on May 29 to vote on the acquisition. One week ago, Zale shareholder TIG Advisors, which owns a 9.5 percent stake in the jewelry chain, announced it would vote against the merger due to numerous inadequacies in the Signet deal and called upon all shareholders to follow suit.

Meanwhile, GAMCO Investors this week allegedly lowered its stake in Zale to 7.42 percent from 8.08 percent and, while GAMCO is considering all of its options, currently intends to vote against the merger, according to GAMCO stated that it intends to seek appraisal rights under Delaware law and its decision was based upon the TIG Advisors report.

In its own defense, Zale reiterated its commitment to Signet Jewelers and claimed that a thorough process was conducted in preparing the merger agreement, which included a comprehensive review of strategic and other alternatives.

Signet's $21 cash-per-share price  represents a 41 percent premium over both Zale’s closing stock price on February 18, 2014, the day prior to the public announcement of the transaction, and the company’s three-month volume-weighted average closing price, according to Zale's statement.

Further, Zale's statement confirmed that the interests of its largest shareholder, Golden Gate Capital with  a 23 percent stake,  are aligned with all shareholders. 

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Tags: acquisition, finance, Jeff Miller, Signet, underwriters, Zale
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