Signet closes $400M offering to help fund Zale buy

Hamilton, Bermuda--Signet Jewelers Ltd. announced Monday that its finance arm has completed an offering of $400 million in senior notes and will use the proceeds to help fund its proposed acquisition of Zale Corp.

According to an 8-K filed with the Securities and Exchange Commission Monday, the net proceeds  from the offering (before expenses) made by Signet UK Finance plc totaled approximately $393.9 million. That money will go toward the chain’s purchase of rival Zale Corp., a transaction with an enterprise value of $1.4 billion (including debt) that is expected to close this year but is being met with objections from some Zale shareholders.

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If the acquisition falls through, Signet UK Finance will be required by Feb. 19, 2015 to redeem the notes at a redemption price equal to 101 percent of the principal amount thereof, plus any accrued and unpaid interest, the 8-K states.

Prior to the closing of the Zale acquisition, the company said it plans to invest the net proceeds from this offering in U.S. government securities, short-term certificates of deposit, money market funds or other short-term financial vehicles.

Signet fully and unconditionally guarantees the notes, which were sold in a public offering, on a senior unsecured basis. According to the 8-K, the notes are set to mature on June 15, 2024, with interest accrual beginning Monday, to be paid in cash on June 15 and Dec. 15 of each year. The first payment will be made on Dec. 15, 2014.

The proposed merger of the country’s two largest specialty jewelers was announced in February. The deal has not raised any anti-trust issues with U.S. authorities and was unanimously approved by Zale’s board of directors.

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The final hurdle to the joining of these former rivals is the vote by Zale’s shareholders, currently set for May 29.

In the last week, however, investor groups have raised objections about the sale. One, TIG Advisors, has called the deal “grossly unfair” for shareholders, claiming they are not getting the per-share price they deserve. TIG Advisors is campaigning for shareholders to vote against the deal.

Zale struck back last week with a statement urging its shareholders to back the deal, which it said in the best interest of the business.