Boston, MA 05/12/2014 (wallstreetpr) – Zale Corporation (NYSE:ZLC) has been in talking terms with Signet Jewellers Ltd. since February 2014 over a possible merger of ZLC with Signet at a meager rate of $21 per share (in cash)! The price ordained was 41% premium over ZLC’s closing price on the date before this deal worth $1.4 billion was offered.
Deal—Grossly Unfair!
The stocks of Zale Corporation (NYSE:ZLC) were witnessing a gradual slide as the day of the decision was looming near, until recently – May 29, 2014 happens to be the date when ZLC’s stakeholders shall vote on the purported merger, during a meeting in Dallas! However, TIG Advisors LLC, who has a 9.5% stake in ZLC, came down heavily, snapping the latter’s decision! TIG challenged Signet Jewelers Ltd.’s deal, dubbing it as ‘grossly unfair’!
Stale Forecasts and the ‘Cheap’ Call
TIG has shown sudden contention against Signet snubbing the offer; the analysts at TIG carried out a review keeping in mind Zale Corporation (NYSE:ZLC)’s 2016 base case, and estimated that share prices should be valued at $31 per share, and on the retailer’s standpoint at $25-per-share. This clearly shows how Signet has undervalued Zale! TIG inferred that perhaps the financial analysts at Zale relied on some stale forecasts to bring about this acquisition.
Did Signet bask in a glory?
Evidences corroborate how the merger happened to be wrongly valued! Soon after the announcement of the merger, the stocks of Signet increased almost 18% soon after the news of the deal began to flutter around; in totality, Signet’s shares increased by 27% through Friday.
The ‘Golden’ Role
TIG has also questioned the veracity about the procedure that led to the deal! Back in October 2013, Golden Gate Capital had shown intent to sell its stake of 22%, which kept the stock surge downwards and barely budged for the rest of the Q4 and Q12014! This led the basis for such an undervalued deal!
Regaining Ground!
The ZLC stakeholders have responded exquisitely—Zale Corporation (NYSE:ZLC) shares regained ground by 3.16% (though trading at 3.2% loss currently), whereas Signet closed with a loss of 0.96%, on Friday in the after-hours session! TIG has pledged to move to court, seeking appraisal rights, in case it fails to block this wrongly-valued deal! Speculations are rife that boosted by TIG’s aggression, ZLC’s per-share-price may shoot up, furthermore!
