Zale Corp. has sold the 175-year-old upscale Bailey Banks & Biddle store chain, which it has owned for 45 years, to Finlay Fine Jewelry Corp. for $200 million. The purchase, plus an inventory adjustment, was expected to close by the end of October, according to Finlay.

Finlay hailed the purchase as a “landmark” transaction, noting it almost triples the stand-alone jewelry stores it operates. Bailey has 70 locations in 31 states.

David Sternblitz, Zale’s vice president and treasurer, said that Bailey didn’t fit the rest of the company’s portfolio. “Bailey’s was profitable, but I think we felt we could allocate those resources toward brands that had higher returns on capital, including Zale’s Outlet and the Canadian brands,” he said.

There is also talk that Zale will sell its Piercing Pagoda division, but Sternblitz said, “Bailey’s had less synergies. Piercing Pagoda attracts more of a moderate customer that is synergistic with our business. We continue to review all the brands but [a sale is] less likely.”

The purchase expands Finlay’s presence in the luxury market and builds on its 2005 purchase of Carlyle Jewelers and 2006 acquisition of Congress Jewelers. It brings its “luxury and better specialty business,” which includes leased departments in retailers Bloomingdale’s and Lord & Taylor, to over $550 million.

Arthur E. Reiner, chairman and CEO of Finlay, told a conference call of analysts, “We anticipate building the business. We think it’s a great brand and it can be enhanced. The quality luxury high-end business has been the fastest-growing business over the last seven years.”

Reiner singled out lifestyle centers as a good fit for the Bailey brand. He noted that Zale had closed 30 Bailey stores in the past year, and added, “It’s probable other stores can be closed as we go forward. You are constantly reevaluating your property and opportunities going forward.” He said the agreement gives Finlay an opportunity to expand its supplier partnerships.

Finlay plans to finance the transaction through a new $550 million five-year revolving credit facility provided by GE Corporate Lending. Finlay’s management expects the acquisition will add sales of about $300 million to its fiscal year.

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