Zale Holder to Oppose Signet Deal

Updated May 23, 2014 5:50 p.m. ET

A large shareholder of diamond retailer


Zale Corp.



ZLC -0.37%



Zale Corp.


U.S.: NYSE


$21.75


-0.08
-0.37%



May 23, 2014 4:03 pm

Volume (Delayed 15m)
:
1.16M



AFTER HOURS



$21.75


0.00
0.00%


May 23, 2014 4:36 pm

Volume (Delayed 15m):
4,042




P/E Ratio
31.35

Market Cap
$941.88 Million


Dividend Yield
N/A

Rev. per Employee
$156,906









05/23/14 Second Big Zale Shareholder to…
05/22/14 ISS Recommends in Favor of Sig…
05/22/14 Stocks to Watch: Best Buy, Per…
More quote details and news »



said Friday it may vote against the company’s sale to larger rival


Signet Jewelers Ltd.



SIG -0.33%



Signet Jewelers Ltd.


U.S.: NYSE


$104.30


-0.35
-0.33%



May 23, 2014 4:03 pm

Volume (Delayed 15m)
:
725,909



AFTER HOURS



$104.27


-0.03
-0.03%


May 23, 2014 5:17 pm

Volume (Delayed 15m):
1,632




P/E Ratio
22.33

Market Cap
$8.38 Billion


Dividend Yield
0.69%

Rev. per Employee
$234,980









05/23/14 Second Big Zale Shareholder to…
05/22/14 ISS Recommends in Favor of Sig…
05/22/14 Stocks to Watch: Best Buy, Per…
More quote details and news »



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.

Corrections & Amplifications
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 at liz.hoffman@wsj.com

  Click to listen highlighted text! Updated May 23, 2014 5:50 p.m. ET A large shareholder of diamond retailer Zale Corp. ZLC -0.37% Zale Corp. U.S.: NYSE $21.75 -0.08 -0.37% May 23, 2014 4:03 pm Volume (Delayed 15m) : 1.16M AFTER HOURS $21.75 0.00 0.00% May 23, 2014 4:36 pm Volume (Delayed 15m): 4,042 P/E Ratio 31.35 Market Cap $941.88 Million Dividend Yield N/A Rev. per Employee $156,906 05/23/14 Second Big Zale Shareholder to… 05/22/14 ISS Recommends in Favor of Sig… 05/22/14 Stocks to Watch: Best Buy, Per… More quote details and news » said Friday it may vote against the company’s sale to larger rival Signet Jewelers Ltd. SIG -0.33% Signet Jewelers Ltd. U.S.: NYSE $104.30 -0.35 -0.33% May 23, 2014 4:03 pm Volume (Delayed 15m) : 725,909 AFTER HOURS $104.27 -0.03 -0.03% May 23, 2014 5:17 pm Volume (Delayed 15m): 1,632 P/E Ratio 22.33 Market Cap $8.38 Billion Dividend Yield 0.69% Rev. per Employee $234,980 05/23/14 Second Big Zale Shareholder to… 05/22/14 ISS Recommends in Favor of Sig… 05/22/14 Stocks to Watch: Best Buy, Per… More quote details and news » 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. Corrections & Amplifications 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 at liz.hoffman@wsj.com Powered By GSpeech