Zale Urges Stockholders to Vote
“FOR” the Signet Transaction that
Provides Zale Stockholders with Compelling Value
Zale Corporation (“Zale”) (NYSE: ZLC) today responded to a
report issued by Glass, Lewis & Co. (“Glass Lewis”) regarding
Zale’s proposed acquisition by Signet Jewelers Limited
(“Signet”).
Zale notes that Glass Lewis reached what Zale believes is a
wrong conclusion in not recommending that Zale stockholders vote
“FOR” the Company’s acquisition
by Signet. Zale strongly believes that Glass Lewis' report contains
numerous inaccuracies, appears to be based primarily on TIG's
flawed analysis and fails to consider the significant risks to the
Zale stockholders associated with the Glass Lewis
recommendation.
Specifically, Zale believes that Glass Lewis bases its
recommendation off of a number of incorrect conclusions,
including:
Glass Lewis Assertion: The Board did not fully explore other
strategic alternatives including the unsolicited interest from the
"overseas" party.
The Facts: On multiple occasions during the course of
negotiating the proposed transaction with Signet, the Zale Board
fully evaluated other strategic alternatives, as well as the
Company’s prospects on a standalone basis. The Board determined
that it would not contact additional potential buyers prior to
signing an agreement with Signet in view of several factors,
including: the low likelihood that any identified alternative
strategic buyer would make an offer for the Company that would
represent more value to the Company’s stockholders than the Signet
proposal; the risk of a leak if any of the potential buyers were
contacted; the risk to Signet’s proposal and the Company’s business
posed by such a leak; and the ability of the Company to negotiate
with, and provide information to, third parties making unsolicited
proposals after signing the merger agreement with Signet. In the
more than three months since the Signet transaction was announced,
no competing offers have been submitted and no other parties have
expressed interest in acquiring Zale.
Additionally, with respect to the contact by the “overseas
party”, the Board made clear to the overseas party that if it were
to make a proposal to acquire the Company that contained a
preliminary indication of value and an indication of financial
resources, the Board would give that proposal appropriate
consideration. However, the overseas party never provided any
indication of value or indication of the financial capability to
consummate an acquisition of the Company.
Glass Lewis Assertion: The valuation of the deal is not
compelling given Zale was in the middle of a turnaround and was
outperforming market expectations.
The Facts: The Zale Board evaluated the $21.00 cash
per share offer price relative to the risks, uncertainties and
challenges associated with the achievement of the Company’s
three-year business plan. These uncertainties and challenges
included, among other things, macroeconomic conditions, commodity
price volatility, competitive threats, the Company’s highly levered
capital structure, and the Company’s aging infrastructure. In
addition, achievement of the three-year business plan assumes
successful and timely execution of several new, critical business
initiatives. Achievement of the FY2016 EBITDA plan of $200 million
would result in a maximum incentive payout (200%) with the target
incentive payout (75%-125%) set at 77% achievement.
The Zale Board’s assessment of the Company’s value on a
standalone basis relative to the $21.00 cash per share offer price
took into account the detailed analyses presented to the Zale Board
that included:
- Comparable public companies analysis
using the FY2016 EBITDA and EPS based on the three-year business
plan, and not last twelve month numbers;
- Discounted cash flow analysis of the
three-year business plan; and
- Relevant precedent specialty
retail acquisition transactions.
Signet’s $21.00 per share cash consideration provides a
compelling present value for achieving the Company’s EBITDA targets
while also eliminating the risk to Zale stockholders of failing to
achieve the business plan.
Glass Lewis Assertion: The participation of a Golden Gate
representative on the Negotiating Committee represented a
conflict of interest.
The Facts: Being a significant stockholder does not
create a conflict of interest. To the contrary, Golden Gate’s
significant holdings in the Company align its interests in
maximizing the equity value of Zale with the other stockholders of
the Company. In addition, the involvement of a director nominated
by Golden Gate on the Negotiation Committee did not represent a
conflict of interest. The Negotiation Committee did not have any
independent authority in negotiating the transaction with Signet.
It simply facilitated the deal process while operating within
specific parameters established by the full Zale Board. The
Negotiation Committee also had no authority in connection with
pricing, which was determined by the full Zale Board.
The Company’s strong and independent Board with substantial
retail and jewelry industry experience unanimously approved the
transaction with Signet.
Glass Lewis Assertion: Bank of America was advising both
companies for a period of 5 weeks and therefore its Fairness
Opinion should not be relied upon.
The Facts: As described in the Zale Definitive Proxy
Statement filed with the SEC on May 1, 2014, Bank of America made a
single unsolicited presentation to Signet in October 2013 and was
never engaged by Signet in connection with a transaction involving
Zale or any other transaction. The Zale Board conducted a thorough
review of Bank of America’s contacts with Signet and concluded that
they did not impact the Zale Board's view that the transaction with
Signet provides immediate, certain and compelling value for the
Zale stockholders.
Zale reiterates the considerable merits of the Signet
transaction and notes the Zale Board’s unanimous view that all Zale
stockholders vote “FOR” the
Signet transaction:
- Signet's $21.00 cash per share price
provides a substantial premium and immediate liquidity to Zale
stockholders.
- Zale’s strong and independent Board,
with substantial retail and jewelry industry experience,
unanimously approved the transaction with Signet.
- The Signet transaction represents
immediate and certain value for the Company’s stockholders,
providing a compelling present value for achieving the EBITDA
targets in the three-year business plan, while also eliminating the
significant risk to Zale stockholders of failing to achieve those
targets.
- Since the transaction was announced on
February 19, 2014, no other parties have expressed interest in
acquiring Zale.
- Importantly, there is risk of a
material decline in the Company’s share price if the transaction
does not close.
The special meeting is scheduled for May 29, 2014, at 8:00 a.m.
local time, at the Company’s executive offices, 901 West Walnut
Hill Lane, Irving, Texas 75038. Zale stockholders of record as of
the close of business on April 30, 2014, will be entitled to notice
of, and to vote at, the special meeting.
The Zale Board of Directors unanimously recommends that Zale
stockholders vote “FOR” the
proposed transaction. Under the terms of the agreement, Zale
stockholders will receive $21.00 per share in cash for each share
of Zale common stock owned.
YOUR VOTE IS IMPORTANT – PLEASE VOTE
FOR THE SIGNET TRANSACTION TODAY
Your vote is extremely important, no matter how many or how few
shares you own. The affirmative vote of holders of a majority of
Zale’s outstanding shares is required to approve the proposal to
adopt the merger agreement. Failing to vote has the same effect as
a vote against the proposal to adopt the merger agreement. Please
take a moment to vote “FOR” the
proposal to adopt the merger agreement today - by telephone, by
Internet or by signing, dating and returning the proxy card.
For more information, please see Zale’s definitive proxy
statement, which was filed with the SEC on May 1, 2014. Zale urges
all stockholders to review the definitive proxy statement and other
materials as they contain important detailed information about the
merger agreement and the reasons why the Zale Board approved the
merger agreement. Stockholders who have any questions or need
assistance voting their shares should contact Zale’s proxy
solicitor, D.F. King & Co., Inc., toll-free at (800) 488-8095
or via email at zale@dfking.com.
About Zale
Zale Corporation is a leading specialty retailer of diamond and
other jewelry products in North America, operating approximately
1,630 retail locations throughout the United States, Canada and
Puerto Rico, as well as online. Zale Corporation's brands include
Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers,
Mappins Jewellers and Piercing Pagoda. Zale also operates webstores
at www.zales.com, www.zalesoutlet.com, www.gordonsjewelers.com,
www.peoplesjewellers.com, and www.pagoda.com. Additional
information on Zale Corporation and its brands is available at
www.zalecorp.com.
Safe Harbor for Forward-Looking Statements
Any statements in this communication about Zale’s expectations,
beliefs, plans, objectives, prospects, financial condition,
assumptions or future events or performance that are not historical
facts, including statements regarding the proposed acquisition of
Zale by Signet (the “proposed transaction”) and the expected
timetable for completing the proposed transaction that are not
historical facts, are forward-looking statements. These statements
are often, but not always, made through the use of words or phrases
such as “believe,” “anticipate,” “should,” “intend,” “plan,”
“will,” “expect(s),” “estimate(s),” “project(s),” “positioned,”
“strategy,” “outlook” and similar expressions. All such
forward-looking statements involve estimates and assumptions that
are subject to risks, uncertainties and other factors that could
cause actual results or events to differ materially from those
expressed in the statements. Among the key factors that could cause
actual results to differ materially from those projected in the
forward-looking statements, are the following: the parties’ ability
to consummate the proposed transaction on the expected timetable or
at all; the conditions to the completion of the proposed
transaction, including the receipt of stockholder approval;
operating costs, customer loss and business disruption (including
difficulties in maintaining relationships with employees,
customers, competitors or suppliers) may be greater than expected
following the announcement of the proposed transaction; the
retention of certain key employees of Zale may be difficult; Zale
is subject to intense competition and increased competition is
expected in the future; and general economic conditions that are
less favorable than expected. Additional information and other
factors are contained in Zale’s Annual Report on Form 10-K for the
fiscal year ended July 31, 2013 and subsequent reports on Form 10-Q
and Form 8-K filed with the Securities and Exchange Commission
(“SEC”). Because the factors referred to above and other risk
factors, including general industry and economic conditions, could
cause actual results or outcomes to differ materially from those
expressed or implied in any forward-looking statements, you should
not place undue reliance on any such forward-looking statements.
Further, any forward-looking statement speaks only as of the date
of this communication, based on information available to Zale as of
the date hereof, and Zale disclaims any obligation to update any
forward-looking statement to reflect events or circumstances after
such date.
Use of Non-GAAP Financial Measures
This communication contains a non-GAAP measure as defined by SEC
rules. This non-GAAP measure is EBITDA, which is defined as
earnings before interest, income taxes and depreciation and
amortization. We believe this measure could be useful in evaluating
the merger. This non-GAAP measure should not be considered in
isolation from, or as a substitute for, financial information
presented in accordance with GAAP, including net earnings (loss).
The Company's calculation of this non-GAAP measure may differ from
others in its industry and is not necessarily comparable with
similar titles used by other companies. Please refer to the
appendix of the Company’s investor presentation, which is available
on the Company’s website at www.zalecorp.com/merger and is an
exhibit to the Current Report on Form 8-K filed with the SEC by the
Company on May 13, 2014, for a reconciliation of this non-GAAP
measure to the most comparable GAAP financial measure.
Investors and Press Contacts:Zale CorporationRoxane
Barry, 1-972-580-4391Director of Investor RelationsorD.F. King
& Co., Inc.Kristian Klein, 1-212-232-2247orJoele Frank,
Wilkinson Brimmer KatcherMatthew Sherman, Kelly Sullivan, Eric
Brielmann, 1-212-355-4449
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