Signet Jewelers buying Zale for about $690M

DALLAS (AP) -- Two diamond sellers are getting engaged.

Signet Jewelers said Wednesday that it agreed to buy Zale Corp. for about $690 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. under the names Kay Jewelers and Jared The Galleria of Jewelry 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.

The companies put the deal's total value at about $1.4 billion.

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.

It 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 after Zale 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 said as part of the deal it entered into a voting and support agreement with Golden Gate Capital, which owns about 22 percent of Zale's shares.

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.