Aug. 22 (Bloomberg) -- Michael Hill International Ltd., New Zealand's largest specialty jewelry retailer, agreed to buy 17 stores in Illinois and Missouri, its first entry into the U.S. retail market.

Michael Hill will pay $5 million for inventory and leases currently owned by Whitehall Jewelers Holdings Inc., which is in chapter 11 bankruptcy, the Brisbane, Australia-based company said in a statement sent to the stock exchange. The agreement is conditional on approval by the U.S. Bankruptcy Court.

Michael Hill has opened 22 stores in Canada as it expands outside Australia and New Zealand, where it has 188 outlets. The new stores, which are around Chicago and St Louis, are a launching pad for the U.S., it said.

The company does not expect these stores to achieve profitability for several years, it said. Michael Hill shares rose 4 cents, or 4.4 percent, to 95 New Zealand cents at the 5 p.m. market close in Wellington trading.

Last week, Whitehall received court approval to liquidate $750 million of inventory held at the company's 373 stores.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

Last Updated: August 22, 2008 01:07 EDT