Activist Expands Zale effort

Securities and Exchange Commission chairman turned activist hedge fund manager didn’t get the Christmas gift he was looking for at Zale Corp. this December. Now he’s hoping Santa will make a rain-check visit in January.

Breeden, founder of mid-capitalization activist hedge fund Breeden Capital Management LLC, on Wednesday hiked his stake in Zale Corp. to 15.1% from 7.7% on Jan. 2 as part of his effort nudge the specialty jewelery retailer into considering strategic options such as auctioning off key assets.

Breeden launched a public activist effort in September, when he filed a Securities and Exchange Commission Schedule 13D detailing that he met with the Irving, Texas-based corporation’s management. In the filing, Breeden said he plans to continue discussions with executives and directors. Talks between Breeden and Zale centered on the company’s financial performance and strategic options for the jewelry company such as an auction of key assets.

Breeden’s effort also comes after Zale in December replaced CEO Mary E. “Betsey” Borton with Neal Goldberg, who will also be president.

In the spring Zale reported that it had hired investment bankers to review strategic alternatives such as selling some assets including its Bailey Banks & Biddle brand and Piercing Pagoda mail kiosks brand. In June 2006, Zale reported it had held unproductive talks to be acquired by mega-jewelry retailer Signet Group plc of London, U.K. (Signet operates the Kay and Jared jewelry chains). In a recent conference call with analysts on Aug. 30, then-Zale Chief Executive Betsy Burton said she has analyzed the viability of selling some of its assets, but she declined to elaborate. But at a Goldman Sachs retail conference on Sept. 6, Burton said Zale will consider closing some unproductive stores and divesting some brands, though no sales were imminent.