Whiteflash-Diamond Playground

From Rapaport - Zale Corporation is selling its high-end fine jewelry chain Bailey Banks & Biddle to Finlay Enterprises Inc. for $200 million. For Zale, the sale represents a major step in new management’s strategy to focus on its core middle market brands. “Today’s announcement is consistent with our strategy to focus on the core business and increasing returns on capital. It provides an opportunity to return a substantial amount of the proceeds to shareholders,” Zale chief executive officer Betsy Burton said in a prepared statement. Zale’s board hired Goldman Sachs earlier this year to evaluate strategic alternatives as it struggled to regain market share. The firm advised Zale on the transaction, which is expected to close by late October. Zale confirmed the rumored sale to The Dallas Morning News late Wednesday. The company may also be shopping around its mall kiosk chain Piercing Pagoda. Last year, Zale closed about 30 underperforming Bailey Banks & Biddle stores, leaving 70 locations, including five in the Dallas area. In addition to its namesake Zales Jewelers, the company operates Zales Outlet, Gordon’s, Piercing Pagoda and Canadian chains Peoples and Mappins Jewellers. Bailey Banks & Biddle is the higher-end chain in a three-legged strategy of good, better, best that was a cornerstone in Zale’s successful turnaround after a bankruptcy in the early 1990s. Zale has about 2,250 stores in the U.S. and Canada. Zale said Thursday it will provide information regarding the anticipated post-sale impact of this transaction on its future financial results at a later date. For Finlay, the deal gives it a well-respected brand with roots dating back to the American Revolutionary War. New York-based Finlay has been buying regional chains, shifting its business from a shrinking department store base. It operates fine jewelry counters in department stores, but that’s been a declining business. Finlay said it expects the acquisition should contribute sales of about $280 million to $300 million in the first full year. Lehman Brothers acted as exclusive financial advisor to Finlay for this transaction. “The acquisition of Bailey Banks & Biddle represents a landmark event for our company. It fits extremely well into our strategy to grow and further diversify our business through acquisitions, and almost triples the number of stand-alone jewelry stores we operate,” said Arthur E. Reiner, chairman and CEO of Finlay. The transaction expands its foot print in the luxury market. In 2005 it acquired Carlyle and last year added Congress chain, increasing its luxury and better specialty business, including Bloomingdales and Lord & Taylor, to over $550 million in annual sales. Reiner said the high-end market, which has performed very well in recent years, will continue to be one of the most attractive segments of the jewelry business. Tiffany’s has performed better than other large chains and luxury retailers such as Dallas-based Neiman Marcus have said their fine jewelry sales are gaining momentum. Meanwhile Cartier, David Yurman and Harry Winston have opened more stores to meet a market demand.