Here’s why one analyst called it the best deal Signet has done in decades as well as thoughts on the company “getting too big.”
My favorite journalism professor in college once told me, “Your opinion is not news,” and I’ve kept that tidbit with me, reminding myself of this fact whenever I feel a strong opinion bubbling up, threatening to sway my coverage.
But here at National Jeweler I’ve been given an opinion column, so I guess the joke is on my professor.
I’m going to examine Signet Jewelers’ plan to acquire Blue Nile and what it could mean for the jewelry industry. Alongside my two cents, I’ve included the opinions of industry analysts and veterans.
Let’s dive into it, one topic at a time.
Growing via acquisition is a go-to move in Signet’s playbook.
Signet announced an agreement to acquire Blue Nile for $360 million in cash [the week of August 15], marking the latest in a laundry list of recent acquisitions.
In April 2021, the jewelry giant announced plans to acquire jewelry subscription service Rocksbox for an undisclosed amount.
In October 2021, Signet said it would buy Diamonds Direct, the Charlotte, North Carolina-based retailer that operates 22 freestanding stores in 13 states.
The company also purchased e-tailer James Allen in 2017 and Zale Corp. in 2014 for $1.4 billion.
Given its history, another acquisition wasn’t all that surprising to me, but the acquisition of Blue Nile wasn’t something I saw coming.
Analyst Paul Zimnisky also was caught off guard.
“I was actually quite taken by surprise, as in the weeks prior Blue Nile agreed to merge with a ‘blank check’ company and go public again,” he said.
A “blank check” company, also known as a shell company or a special purpose acquisition company (SPAC), is a company created to raise capital for the sole purpose of acquiring or merging with another company.
Blue Nile has been around since 1999 and initially went public in 2004 but was taken private in 2017 when Bain Capital Private Equity and Bow Street LLC acquired it in a $500 million deal.
This June, the company announced it was ready to go public again via a merger with SPAC Mudrick Capital Acquisition Corporation II.
The timing was off.
“I thought they were late to the party with the timing of that deal given that the SPAC bubble had popped, but [Blue Nile] did file a Form 8-K [with the SEC], and it seemed as if they were serious about consummating the deal,” said Zimnisky.
When Zimnisky says the SPAC bubble burst, he’s referring to a recent lack of investor interest in these types of deals, to put it simply. A Form 8-K is a form filed by a public company with the U.S. Securities and Exchange Commission to notify investors about an important event.
The SPAC deal was valued at $683 million, so why would Blue Nile, two months later, agree to a deal with Signet nearly half that size?
“The Signet deal is at a lower valuation, so it appears [Blue Nile] did have difficulty getting the original deal done after all, given the market conditions,” said Zimnisky.