Zale Corp.'s board of directors said that after careful consideration it has terminated early merger talks with rival jewelry chain Signet Group.

News of the potential merger first surfaced in news reports over the weekend. Signet Group confirmed that there were preliminary talks in a press release issued Monday morning, stating: “However, at this early stage, there is considerable uncertainty as to whether any transaction will be forthcoming.”

Zale Corp. sent out a statement of its own Monday afternoon, confirming the merger discussions, but saying that after careful consideration, Zale's board of directors terminated the discussions, having concluded that “its shareholders are best served by continuing as an independent company.”

“We are putting the pieces in place to regain market share and improve profitability and have strengthened leadership in key operating units,” Betsy Burton, the chain's acting CEO said in the press statement. “Our management team is fully focused on preparing the company for the 2006 Holiday Season, having developed a sound 'back to basics' plan for accomplishing its key strategic objectives.”

Burton also said that the company's strong potential as a stand-alone business, executing its strategy, offers the best prospect for enhancing shareholder value. The company also indicated that it intends to announce the results of its CEO search within the next several weeks.

Zale Corp. has been searching for a new CEO since Mary Forte resigned at the beginning of the year and has been grappling with leadership changes amid the departure of several other key executives.

Over the past year, Zale has lost market share to Sterling's U.S. subsidiary Kay Jewelers, which made gains while Zale struggled through a an ill-fated attempt to shift its focus from its core middle America customer to a more upscale shopper. Kay's parent company, Sterling Jewelers, surpassed Zale in fiscal 2005 sales for the first time in National Jeweler's US$100 Million SuperSellers list.

Source: www.nationaljeweler.com