Breeden Capital Management sees Zale Corp. as a diamond in the rough. When TheDeal's Carolyn Murphy first reported Jan. 3 that Breeden Capital increased its ownership in Zale Corp to 15.9% and became the largest stakeholder of the company, the transaction rekindled speculation that a divestiture or merger is just around the corner. The New York Post on Tuesday suggests Breeden should reexamine the sale of Zale to British-based rival Signet Group Plc, the operator of Kay Jewelers and Jared chains.
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In mid-2006, Zale's board rejected an offer from Signet. But with Breeden holding a larger stake and most likely pushing for more change including on the board, maybe a Zales-Signet hookup is still feasible? Zale is bleeding cash, suffering through losses in the last four of six financial quarters while Signet has shown some modest growth in its business with sales increasing 7.9% in the third quarter. Signet could grow those numbers through a merger as some analysts point out that the London retailer's U.S. mall stores generate more than double the operating profit
achieved by Zale. Some suggest a union would only grow that operating profit if the businesses were to merge.
But even if those profit projections are too optimistic, no one can deny that Signal CEO Terry Burman has been calling for acquisitions in the U.S. to fuel his company's growth. Burman unveiled a war-chest of $1 billion (£544 million) in mid-2006 and is still looking for his American jewel. -- Gerald Magpily
See Bloomberg news via Dallas Morning News
See New York Post article
See Financial Times article
See TheDeal.com: Breeden boosts stake in Zale
