TIG Urges Shareholders to Block Signet's Buyout of Zale

TIG Advisors LLC told Zale Corporation investors to vote against the Signet Jewellers Ltd. buyout and it has filed a preliminary proxy statement to oppose the merger. TIG owns approximately 9.5 percent of Zale's shares.  Zale's shareholders are scheduled to vote on the merger on May 29, during a special meeting in Dallas, Rapaport reports.
“We believe the current offer price of $21 per share is grossly unfair to current shareholders. Shareholders are not being paid a fair value for the margin expansion opportunity they already own, much less a premium. The transfer of value to Signet shareholders and the lopsided sharing of deal synergies could not be seen more clearly than by comparing the $1.4 billion of value accretion that Signet shareholders have enjoyed versus the $286 million premium paid for Zale shares. Said another way, Signet holders have benefited 5x the amount that Zale holders have,” said Drew Figdor, the portfolio manager at TIG.
TIG's analysis of the Zale and Signet deal identified several problematic issues in how Signet valued Zale.  The day before the announcement in February, Zale was trading at an EV/EBITDA multiple of 9.1 times 2016 analyst estimates. Using Zale's 2016 base-case estimate, this would imply a $31 share price and by the retailer's estimation for downside estimates, the figure would still be $25 share, according to TIG.