TIG, which owns about 9.5 percent of Zale shares, plans to vote against the transaction at a special meeting of shareholders on May 29, according to a statement today. While the deal is expected to bring $1.4 billion of value to Signet shareholders, the acquirer is only paying a $286 million premium for Zale shares, TIG said.
“Shareholders are not being paid a fair value for the margin expansion opportunity they already own, much less a premium,” Drew Figdor, portfolio manager at New York-based TIG, said in the statement. “Said another way, Signet holders have benefited 5x the amount that Zale holders have.”
Shares of Irving, Texas-based Zale rose 3.2 percent to $21.85 amid speculation that the company may ultimately fetch a higher price. The gain was the biggest one-day increase since the deal was announced in February.
Representatives for Signet and Zale didn’t immediately respond to a request for comment.
In a statement calling it the “right deal -- wrong price,” TIG questioned the use of “stale financial forecasts” and the role of Golden Gate Capital Corp., which owns more than 23 percent of Zale’s stock.
TIG believes the deal “was flawed from the outset because it neither recognized the value of the turnaround already well under way nor did it split the value of deal synergies with Zale holders in an equitable manner,” the investor said. “TIG Advisors believes that both issues could have been addressed with an equity component to the consideration.”
Activist investors tend to buy at least 5 percent of a company’s stock and flag their intention to actively engage corporate executives and directors by disclosing their holding in a 13D filing with the U.S. Securities and Exchange Commission.