Jewelry giants

Avi Krawitz

Signet Jewelers’ $1.4 billion acquisition of Zale Corporation announced last week signals the emergence of another retail giant in the diamond and jewelry market; not that the two companies were such small fish until now. Along with Tiffany & Co., Signet and Zale represent the top three specialty jewelers in the U.S. by revenue, while the latter two far exceed Tiffany & Co. by store count. The deal, pending regulatory approval, will consolidate Signet’s position as the largest jeweler in the U.S.

The combined company would have had a total revenue of $6.2 billion in 2013. Management estimates that it will hold about 15 percent of the U.S. specialty jewelry market and just over 6 percent of the overall U.S. jewelry retail market once the deal closes. The combined 3,653 stores will be made up of 2,958 in the U.S., 496 in the U.K., and 199 in Canada. Zale brings six brands to the portfolio that would complement, and in many cases compete with, Signet’s 17 brands.

Store closures and combinations are inevitable and one expects Signet to drive efficiencies at the enlarged company. Signet projected an estimated $100 million in savings from synergies by the end of the third full year of combined operation. Analysts at Sterne Agee suggested that estimate was conservative and that total synergies could reach up to $175 million. While sometimes the combined revenue of a merged company falls short of the preceding individual businesses – due to synergies – Sterne Agee projected that Signet’s revenue could grow 4 percent annually to $7.2 billion by 2017.

Read more

Source Rapaport