- Details significant flaws in Zale’s
analysis in its ISS presentation
- Gratified to receive strong stockholder
support against the Signet merger
TIG Advisors, LLC (“TIG Advisors” and together with its
affiliates the “TIG Advisors Group” or “we”) a stockholder of Zale
Corporation (NYSE:ZLC) (“Zale” or the “Company”), owning
approximately 9.5% of its outstanding shares of common stock, today
released a presentation to fellow stockholders responding to Zale’s
attempt to justify the proposed merger with Signet Jewelers Limited
(NYSE:SIG)(“Signet”) for $21 per share in cash.
TIG Advisors continues to urge fellow Zale stockholders to vote
their BLUE proxy AGAINST the approval of the Merger
Agreement with Signet and related compensation proposals at the
Special Meeting.
A Flawed Analysis – Merger Fails to Provide Compelling
Value
On May 13, 2014, Zale filed an investor presentation (the “Zale
Presentation”) with the Securities and Exchange Commission (“SEC”)
for use in a meeting with Institutional Shareholder Services
(“ISS”). TIG Advisors believes the Zale Presentation presents a
flawed analysis in a number of key respects, which are summarized
below and discussed in more detail in TIG Advisors’ presentation
filed with the SEC today
http://www.sec.gov/Archives/edgar/data/109156/000092189514001213/ex991dfan14a09571007_051614.pdf
Flawed Comparable Transactions
Analysis:
- The Zale Presentation includes a range
of precedent transactions that omit some surprisingly obvious
transactions for comparison;
- Two of the most logical precedent
omissions are the sale of Harry Winston to Swatch in 2013 for 24x
and the sale of Bulgari to LVMH in 2011 for 27x;
- Interesting to note that Zale’s
presentation includes the 2006 Harry Winston sale precedent (a
10.5x multiple) but not the higher and more recent precedent.
Flawed Premium Paid Analysis:
- Zale relied on “Last Twelve Month” or
LTM figures that are inappropriate for a business engaged in a
significant turnaround;
- Analyst expectations for Zale’s margin
expansion potential were significantly below Management’s own
views;
- Zale shares underperformed the market
since the filing of a registration statement in respect of Golden
Gate Capital’s shareholdings;
- The premium paid analysis used fails to
adjust for strategic transactions where value can be attributed to
synergies versus private equity transactions where that is
generally not the case.
Compelling Standalone
Prospects:
- The Zale Presentation appears to make
the point that the base case F2016 plan is a “stretch” objective
that may be difficult to achieve – we do not believe these
projections should be dismissed and are in fact realistically
achievable;
- Management’s F2016 projections in the
“Alternative” case call for $172M of EBITDA, or approximately 43%
higher than the street was forecasting. Applying Zale’s trading
multiple, as evaluated the day before the agreement was announced,
to the Alternative case would indicate a standalone value of
>$25 per share;
We encourage Management to publish earnings results so that
shareholders and ISS can better assess Management’s capabilities
and the state of the business.
What You Can Do
We filed proxy materials with the SEC to solicit proxies from
Zale stockholders in opposition to the Signet merger. Support our
efforts by voting on the BLUE proxy card by internet, telephone or
mail AGAINST the approval of
the Merger Agreement and related compensation proposals at the
Special Meeting. Alternatively, you may use management’s white
proxy card to vote AGAINST the
proposals.
We look forward to continuing to communicate with all of you in
the days ahead.
If you have any questions in the interim, we encourage you to
contact Charlie Koons 212-929-5708 or Larry Dennedy 212-929-5239 at
MacKenzie Partners.
Sincerely,
Drew FigdorPortfolio Manager212-644-5178
About TIG Advisors
TIG Advisors, LLC ("TIG") is an SEC registered investment
adviser. Founded in 1980, the firm is engaged in the active
management of alternative investment funds and their underlying
businesses. The company seeks to partner with experienced and
talented portfolio managers that it believes have proven and
repeatable investment processes. The firm strives to provide a
platform for managers to preserve the culture, philosophy, and
research capability that is distinct to their investment
discipline, while also drawing on the institutional infrastructure
of TIG.
CERTAIN INFORMATION CONCERNING PARTICIPANTSTIG Advisors, LLC,
together with the other participants named herein (the “TIG
Advisors Group”), has made a preliminary filing with the Securities
and Exchange Commission (“SEC”) of a preliminary proxy statement
and accompanying BLUE proxy card to be used to solicit votes
against approval of the Agreement and Plan of Merger, dated as of
February 19, 2014, by and among Zale Corporation, a Delaware
corporation (the “Company”), Signet Jewelers Limited, a Bermuda
corporation ("Signet") and Carat Merger Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Signet, at a special
meeting of stockholders of the Company scheduled to be held on May
29, 2014 (the “Special Meeting”).
THE TIG Advisors Group STRONGLY ADVISES ALL STOCKHOLDERS OF THE
COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS
ARE AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT
HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY
SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT
CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE
DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR.
The participants in the proxy solicitation are TIG Advisors, LLC
(“TIG Advisors”), TFI Partners, LLC (“TFI Partners”), TIG Arbitrage
Associates Master Fund, L.P. (“TIG Associates”), TIG Arbitrage
Enhanced Master Fund, L.P. (“TIG Enhanced”), Carl Tiedemann and
Michael Tiedemann.
As of the date hereof, TIG Associates directly beneficially
owned 175,142 shares of Common Stock, including 5,600 shares of
Common Stock underlying certain call options exercisable within 60
days hereof. As of the date hereof, TIG Enhanced directly
beneficially owned 467,832 shares of Common Stock, including 15,000
shares of Common Stock underlying certain call options exercisable
within 60 days hereof. TFI Partners, as the general partner of each
of TIG Associates and TIG Enhanced, may be deemed the beneficial
owner of 642,974 shares of Common Stock beneficially owned by TIG
Associates and TIG Enhanced, including 20,600 shares of Common
Stock underlying certain call options exercisable within 60 days
hereof. As of the date hereof, TIG Advisors beneficially owns
4,104,775 shares of Common Stock, consisting of 642,974 shares of
Common Stock beneficially owned directly by TIG Associates and TIG
Enhanced (including 20,600 shares of Common Stock underlying
certain call options exercisable within 60 days hereof), and
3,461,801 shares of Common Stock held in other accounts managed by
TIG Advisors (the “TIG Advisors Accounts”), including 111,200
shares of Common Stock underlying certain call options exercisable
within 60 days hereof. Carl Tiedemann, as the managing member of
each of TIG Advisors and TFI Partners, may be deemed to be the
beneficial owner of the aggregate of 4,104,775 shares of Common
Stock, including 131,800 shares of Common Stock underlying certain
call options exercisable within 60 days hereof, beneficially owned
directly by TIG Associates and TIG Enhanced and held in the TIG
Advisors Accounts. Michael Tiedemann, as the managing member of
each of TIG Advisors and TFI Partners, may be deemed to be the
beneficial owner of the aggregate of 4,104,775 shares of Common
Stock, including 131,800 shares of Common Stock underlying certain
call options exercisable within 60 days hereof, beneficially owned
directly by TIG Associates and TIG Enhanced and held in the TIG
Advisors Accounts.
Investor ContactMacKenzie Partners, Inc.Charlie Koons
212-929-5708ckoons@mackenziepartners.comorLarry Dennedy
212-929-5239ldennedy@mackenziepartners.comorMedia
ContactBayfield Strategy, Inc.Riyaz Lalani,
416-907-9365rlalani@bayfieldstrategy.com
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