Former SEC Chairman
Richard Breeden |
Less than two weeks after activist hedge fund manager Richard Breeden launched an insurgency to press Zale Corp. into auctioning assets and making other changes, the specialty jewelry chain on Thursday announced that it had sold its high-end fine jewelry chain Bailey Banks & Biddle to Finlay Enterprises Inc. for $200 million.
Breeden, a former Securities and Exchange Commission chairman, on Sept. 17 reported with the agency that he had bought a 7.7% Zale stake and began talks about strategic options such as asset sales with management of the Irving, Texas-based corporation. On Sept. 25, Citadel Investment Group LLC reported it had bought a 5.3% Zale stake, indicating that managers there believed changes were afoot at Zale. Other large Zale investors are S.A.C. Capital Advisors LLC, which has a 5.1% stake, and Hayground Cove Asset Management LLC, a 5.6% shareholder.
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Breeden's effort and the Bailey Banks & Biddle sale come after Zale reported in June 2006 that it had held unproductive talks to be acquired by megajewelry retailer Signet Group plc of London. (Signet operates the Kay and Jared jewelry chains.) After the collapse of that effort, Zale CEO Betsy Burton said she has analyzed the viability of selling some of its assets, but she declined to elaborate. But at a Goldman, Sachs & Co. retail conference on Sept. 6, Burton said Zale will consider closing some unproductive stores and divesting some brands, though she added at the time that no sales were imminent.
"Today's announcement is consistent with our strategy to focus on the core business and increasing returns on capital. It provides an opportunity to return a substantial amount of the proceeds to shareholders," said Burton in a statement.
Zale expects the transaction to close in October. It retained Goldman Sachs to assist it in examining strategic options. An analyst following Zale said he believed Breeden would likely continue pressing for the jewelry chain to sell additional assets or the whole company. —Ron Orol
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Ron Orol is a reporter for The Deal and author of Extreme Value Investing: How Activist Hedge Fund Managers Are Taking on the World.
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