TIG Advisors, LLC (“TIG Advisors” and together with its affiliates the “TIG
Advisors Group” or “we”) a stockholder of Zale Corporation ZLC (“Zale”
or the “Company”), owning approximately 9.5% of its outstanding shares of
common stock, today responded to the Zale board's attempt to justify the
proposed merger with Signet Jewelers Limited SIG(“Signet”) for $21 per
share in cash in an open letter addressed to TIG Advisors.
TIG Advisors continues to be disappointed by the Zale board's lack of
constructive engagement with its shareholders. The board's open letter to TIG
Advisors displayed a baffling and intransigent defense of the deal valuation
and negotiation process. Far from addressing our and other shareholders'
concerns, the board's letter serves to underscore our belief that the $21 per
share offer is inadequate, and the process by which it was arrived at was
flawed in a number of important respects.
In its letter, the board continues to talk-down the prospects of Zale,
ignoring its own forecasts and improving performance. Zale's Q3 earnings
results released today point to a strong and vibrant underlying business, with
the Company beating street estimates for EBIT, EBITDA and EPS. TIG Advisors
believes that Zale is in the mid-stages of a turnaround, with substantial
value creation ahead of it.
Contrary to the board's assertions, TIG Advisors is acting in the interests of
all of our fellow stockholders. We believe the upside potential and synergies
created by the proposed merger with Signet should be shared equitably with
Zale shareholders. As we have repeatedly maintained, this is the "Right Deal
at the Wrong Price."
The board acknowledges an 18% jump in Signet's share price on the day the
merger with Zale was announced, but disingenuously attributes this value
creation to a decision by Signet to increase the leverage on its balance
sheet. TIG Advisors believes that the potential balance sheet enhancements by
Signet were well understood, anticipated and largely priced-in by market
participants. In fact, on 1/24/14, Signet issued a statement acknowledging a
meeting with a significant institutional investor to discuss these items.
According to Signet's statement and the investor's securities filings, the
investor reviewed various strategic alternatives with Signet including
“leveraging credit receivables” and “optimizing the capital structure.” We
continue to believe the sustained value accretion in Signet stock since the
announcement of the Zale merger is attributable to the unrecognized value in
Zale and the potential synergies created by the proposed merger.
Finally, the board continues to defend the participation of Golden Gate
Capital's representative on the negotiation committee, claiming no conflict in
having a shareholder with a stated intention to exit its position, negotiating
the transaction. On the day the S-3 registration statement was filed for
Golden Gate's shares, Zale's stock closed at $15.75 per share. Faced with
selling their shares in a secondary offering or selling to Signet, Golden Gate
had a strong incentive to favor a sale of the Company now, at the expense of
maximizing shareholder value in the best interests of all shareholders.
TIG Advisors is substantial stockholder, owning approximately 9.5% of the
stock. We intend to vote AGAINST the $21 per share offer for Zale, and
encourage our fellow stockholders to do the same.
We filed proxy materials with the SEC to solicit proxies from Zale
stockholders in opposition to the Signet merger. Support our efforts by voting
on the BLUE proxy card by internet, telephone or mail AGAINST the approval of
the Merger Agreement and related compensation proposals at the Special
Meeting. Alternatively, you may use management's white proxy card to vote
AGAINST the proposals.
Even if you have previously deposited a management white proxy card in support
of the proposals, you can still change your vote by voting your BLUE proxy
AGAINST the merger.
If you have any questions or require assistance in voting your proxy, we
encourage you to contact Charlie Koons 212-929-5708 or Larry Dennedy
212-929-5239 at MacKenzie Partners.
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