THE WALL STREET
Zale Shareholder to Oppose Sale to Signet
Investor May Seek
Second Opinion on Acquisition Price
Updated May 23, 2014
5:50 p.m. ET
A large shareholder of
Zale Corp. said Friday it may vote against the company's sale to
Signet Jewelers Ltd. and instead seek a second opinion on the
deal's $21-a-share price in court.
Mario J. Gabelli, whose
funds own 7.45% of Zale, said in a securities filing he had "commenced
the process to be able to assert appraisal rights"—a legal process
that lets shareholders reject a merger deal and instead ask a judge to
independently value their shares. The filing didn't say exactly what
steps Mr. Gabelli has taken, or detail his objections to the deal.
A 7.45% stake would make
Mr. Gabelli and his funds the third-largest holder of Zale's common
shares, assuming other big shareholders have held their stakes steady
since March 31, according to Lionshares.
Appraisal actions are on
the rise as investors seek to make more money on deals.
Appraisal lawsuits were brought on 17% of takeovers of
Delaware companies last year, the most since at least 2004, according
to researchers at Brooklyn Law School and Case Western Reserve
University. Shareholders are seeking appraisal on the buyouts of Dole
Food Co., BMC Software Inc. and Dell Inc., among others.
Mr. Gabelli's move comes as
another large Zale investor, TIG Advisors LLC, is trying to
rally opposition to the transaction, which it says undervalues the
company. TIG, which owns 9.5% of Zale, has said the company could be
valued at up to $28.60 a share.
In attempting to scuttle
the vote, set for Thursday, TIG must contend with Golden Gate Capital,
which controls 23% of Zale and has agreed to vote in favor of the
transaction, which was announced in February.
TIG's odds got longer this
week when Institutional Shareholder Services Inc., which advises asset
managers on how to cast their votes,
came out in support of the deal. TIG has said it disagrees with
ISS's assessment, and in a presentation Friday disputed some of the
proxy adviser's calculations.
Zale shares closed Friday
at $21.75, down eight cents.
Mr. Gabelli's stake in Zale is 7.45%, which would make him and his
funds the third-largest holder of Zale's common shares, assuming other
big shareholders have held their stakes steady since March 31. An
earlier version of this article incorrectly said he owned 4.45% and
was the fifth-largest shareholder.
Write to Liz Hoffman