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Zale Shareholders Hearing Both Sides on Signet Deal

After ISS endorsement, two proxy advisors split on wisdom of merger.

Two days in advance of a Thursday vote by Zale Corp. shareholders to approve or reject Signet Jewelers Ltd.’s offer to buy the company for $1.4 billion, a pair of proxy advisers disagreed on what their choice should be.

Glass Lewis sided with TIG Advisors LLC’s view that the deal between the midtier jewelry chains, for $21 a share in cash, should be rejected. “Shareholders would be better served rejecting the transaction in favor of a more robust strategic review and, in the absence of a compelling alternative, the continued pursuit of Zale’s standalone operating plan,” its report said. Glass Lewis criticized Zale’s review process, “including a myopic exploration of alternative bidders, the appointment of a Golden Gate Capital representative to the negotiation committee and relying on the fairness letter of a conflicted financial adviser,” Bank of America.

TIG owns 9.5 percent of Zale’s stock. It intends to vote against the deal and has encouraged fellow shareholders to do the same or withhold their votes and deny Zale the quorum it needs to proceed with a Signet-Zale combination.


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As Institutional Shareholder Services did on Thursday, Egan-Jones Proxy Services on Tuesday recommended a vote for the merger, calling it “a desirable approach in maximizing shareholder value.” It said the transaction’s “advantages and opportunities outweigh the risks associated to the transaction.”

Last week, Gabelli Funds LLC and affiliated interests, which collectively own 7.5 percent of Zale’s equity, said in a filing with the Securities and Exchange Commission that they “are considering” withholding their votes or “voting in such a manner that allows the reporting persons the ability to assert appraisal rights under Delaware law.”

The assertion of appraisal rights would allow for Delaware’s Court of Chancery to review the deal and whether or not it offers fair value to shareholders.

Golden Gate is Zale’s largest shareholder with 23.3 percent of the shares outstanding.

Zale disputed several of the assertions in the Glass Lewis recommendation against the deal, which it linked to TIG’s earlier analysis. Specifically, Zale said that it never received an indication that an unnamed “overseas party” had the financial resources to consummate a deal to buy the company.