Zale Corp., a leading retailer of fine jewelry in North America, said Thursday that it will sell Bailey Banks & Biddle, the 175-year-old upscale jewelry chain it has owned for 45 years, to Finlay Fine Jewelry Corp. for $200 million. Finlay hailed the purchase as a “landmark” transaction for its company, strengthening its activity in the U.S. luxury market. Finlay also owns Greensboro, N.C.-based Carlyle Jewelers, and the fine jewelry departments in Bloomingdale’s and Lord & Taylor stores. 

The purchase, plus an inventory adjustment, is expected to close by the end of October, according to Finlay.

The sale 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,” said Betsy Burton, chief executive officer of Irving, Texas-based Zale Corp. The company said it would provide information about the anticipated post-sale impact of the sale on its future financial results at a later date.

Arthur E. Reiner, chairman and chief executive officer of Finlay Enterprises, Inc., the parent firm of Finlay Fine Jewelry, called the acquisition of Bailey Banks & Biddle “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.” Finlay is one of the leading retailers of fine jewelry in the United States, with sales of $761.8 million in fiscal 2006.

Finlay plans to finance the transaction through a new $550 million five-year revolving credit facility provided by GE Corporate Lending. Finlay’s management’s expects the acquisition will add sales of about $280 million to $300 million to the fiscal year ending Jan. 31, 2009, the first full year of operation following completion of the transaction.

The purchase expands Finlay’s presence in the luxury market and builds on its 2005 purchase of Carlyle Jewelers and 2006 acquisition of Florida-based Congress Jewelers, which, along with its department and specialty store locations, brings its business to over $550 million.

“We believe 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,” said Reiner. “Bailey Banks & Biddle is a premier brand and represents a significant expansion for Finlay in this luxury market. We believe Finlay can achieve synergies and optimize Bailey Banks & Biddle’s overhead infrastructure by leveraging our merchandising talent, operational expertise and strong vendor relationships.”

Zale bought Bailey Banks & Biddle in 1962. The high-end retail jeweler, established in 1832, was an institution in Philadelphia, but also was known for the thousands of Purple Heart medals and the class rings for West Point and the United States Naval Academy it crafted over the century.

Zale Corp. operates approximately 2,250 retail locations in the United States, Canada and Puerto Rico. Its other store chain brands include Zales Jewelers, Zales Outlet, Gordon’s Jewelers, Fine Jewelers, Peoples Jewellers, Mappins Jewellers (both in Canada) and Piercing Pagoda. In the past few years, Zale closed dozens of underperforming Bailey Banks & Biddle stores, leaving 70 locations operating in 31 states.

JCK