Finlay to buy jeweler Bailey Banks

Philadelphia icon Bailey Banks & Biddle, founded in 1832, is being sold for $200 million to a retailer with ambitions to grow its luxury-jewelry business, Finlay Enterprises Inc.

Bailey Banks, which has four Philadelphia-area stores among its 70 stores in 24 states, has been owned since 1962 by Texas retailer Zale Corp., which said yesterday that it wanted to concentrate on its more profitable divisions.

The sale "is consistent with our strategy to focus on our core moderate-jewelry business and to improve our returns on capital," Zale vice president and treasurer David Sternblitz said yesterday. "Bailey Banks & Biddle stores are beautiful stores and have a tremendous tradition, but the business is less synergistic with the remainder of our corporation."

The head of Finlay said Bailey Banks & Biddle would fit right in at his company, as it sought to expand its market share in the booming luxury market.

Finlay, of New York, operates luxury specialty-jewelry stores and fine-jewelry departments in department stores.

"This is just a landmark opportunity to really expand our specialty business and aim for a consistent customer throughout the U.S.," Arthur E. Reiner, chief executive officer and chairman of Finlay, said in an interview yesterday.

He said the deal would also give Finlay a larger national presence and diversify its revenue streams. It could generate upward of $280 million to $300 million of new revenue for Finlay in fiscal 2008.

Reiner said acquiring the Bailey Banks & Biddle brand would significantly expand Finlay's presence in the luxury market by complementing its Carlyle and Congress brands and would give the company a larger representation in the Philadelphia area.

Finlay owns 33 Carlyle stores, including two in King of Prussia and one in Ardmore, and is opening one in Bucks County.

"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," Reiner said. "We see Bailey Banks & Biddle as a really terrific brand. We believe that the segment of the business that they cater to - the more-affluent, higher-end customer - will complement our specialty business . . . and gives us more of a balance between the higher-end business and leased-department-store business."

Zales' Sternblitz said Bailey Banks & Biddle's "performance was below the corporate average."

He said Zale, of Dallas, was also in the process of centralizing merchandising functions, including the purchase of diamonds, to increase efficiency. Sternblitz said Bailey Banks & Biddle, which is more a designer-branded business, did not fit in with that strategy because the designers supply the product, instead of the company sourcing it directly.

The sale is expected to close at the end of October, Sternblitz said.

Bailey Banks & Biddle was founded in the 19th century in Philadelphia. Zale bought the chain in 1962, when it had just two stores. It grew to 70 stores and a national presence.

Bailey closed its Chestnut Street store in June 2002, where it had been since 1953, as new retail merchants moved into the neighborhood. J.E. Caldwell & Co. Jewelers, another upscale jeweler and Philadelphia institution that catered to the city's carriage trade, also closed its 1339 Chestnut St. store, in summer 2003. Finlay also owns J.E. Caldwell stores under the Carlyle brand.

Shares of Zale closed up 44 cents yesterday at $24.03 on the New York Stock Exchange. Additionally, Finlay's stock rose almost 19 percent to close at $3.73 on the Nasdaq.

Bailey Banks & Biddle

Founded: 1832

in Philadelphia.

Current owner: Zale Corp. of Irving, Texas, since 1962.

Stores: 70 - including at the Cherry Hill Mall, the Plaza at King of Prussia, Willow Grove Park mall and Christiana Mall.

2006 sales: More than $280 million.

Employees: 750.

Finlay Enterprises Inc.

Founded: 1887 in New York.

Headquarters: New York.

Stores: In 687 department stores, including Macy's, Bloomingdale's, Bon-Ton, Lord & Taylor and Dillard's.

Fiscal 2007 sales:

$762 million.

Employees: 4,500.

Ownership: Shares publicly traded on Nasdaq since 1995.

SOURCES: Companies listed, Bloomberg NewsEndText