Bermuda and Akron, Ohio-based Signet Jewelers Ltd (NYSE: SIG), the world’s largest retailer of diamond jewelry, said it agreed to acquire Israeli-American company R2Net, owner of online jewelry retailer JamesAllen.com and Segoma Imaging Technologies, for $328 million in cash.
The move comes four months after U.S. private equity firm Francisco Partners acquired a 50% stake in R2Net for $140 million, in a deal which included Francisco’s buyout of a 25% stake in R2Net previously acquired by Israel Growth Partners for $25 million in December 2014.
R2Net was founded in 2006 by Oded Edelman, James Schultz, Michele Sigler and Dean Lederman. The company is headquartered in New York City with global operations, including technology innovation centers in Israel and 24/7 customer service operations in Frederick, Maryland.
R2Net, conceived as “Rough Diamonds to Internet,” operates a robust e-commerce and supply chain platform that connects the entire span of the diamond industry’s ecosystem, including manufacturers, retailers and consumers. R2Net owns and operates four distinct brands: JamesAllen.com, Segoma, D-Market and Brio Animation Studio. The company provides highly magnified 360° HD images of diamonds to diamond polishers, and then displays them on its D-Market and JamesAllen.com platforms, allowing retailers, manufacturers and consumers to transact digitally without the high expenses and time delays associated with traditional brick and mortar alternatives.
JamesAllen.com, one of the fastest growing online retailers of engagement rings and loose diamonds, has grown its sales by more than 2.5x in the last two years as consumers have embraced the company’s use of technology to bring simplicity, selection, pricing transparency and overall value to the engagement ring shopping process. JamesAllen.com visitors can shop directly for the exact diamond they want and then design or customize their own personalized jewelry pieces.
Using the company’s proprietary Diamond Display Technology, consumers can view each of the site’s 150,000+ conflict-free, fully certified loose diamonds, as well as hundreds of ring settings, in 360° HD and zoomed up to 40x. JamesAllen.com operates almost exclusively online, with the exception of its by-invitation-only showroom in New York City.
The deal will bring together Signet’s jewelry retail business with R2Net’s innovation capabilities and digital technology, positioning Signet towards building scalable digital capabilities forannel transformation.
Signet operates approximately 3,600 stores primarily under the name brands of Kay Jewelers, Zales, Jared The Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples and Piercing Pagoda.
“This is a highly strategic acquisition for Signet. The James Allen brand and R2Net’s technologies and innovative approach present a unique opportunity to rapidly enhance our digital capabilities and create a distinctive customer shopping experience which more seamlessly integrates our digital and physical retail platforms,” said Signet CEO Virginia C. Drosos. “We look forward to the R2Net team, who have been long-term partners on our Jared Design-A-Ring platform, joining the Signet family. Together, we will redefine the jewelry shopping experience and further accelerate our Customer-First OmniChannel strategy.”
“We founded JamesAllen.com with a mission to offer beautiful rings, simplicity, selection, pricing transparency and overall value to consumers online,” said Edelman, R2Net Co-founder and CEO. “By joining forces with Signet, we believe we will be able to accelerate the growth of JamesAllen.com and our adjacent R2Net businesses while continuing to build on our unique culture and technology.”
The deal is expected to close in the third quarter of fiscal 2018 subject to customary closing conditions and regulatory approval and will be financed with a term loan provided by JPMorgan Chase Bank, which is expected to be repaid in full by the end of fiscal 2018. Signet sees significant growth and value creation opportunities from the implementation of R2Net’s technology across its physical and online retail platforms. Signet anticipates the deal to be accretive in the first full year of operations.
Following the acquisition, R2Net brands will largely operate as an independent division of Signet and its current leadership team will remain intact. In addition to his role as President of JamesAllen.com, Edelman will become Chief Digital Innovation Advisor of Signet, where he will report directly to Ms. Drosos and assume the responsibility for driving Signet’s digital innovation strategy. Edelman and the R2Net co-founders have agreed to invest a portion of their transaction proceeds in Signet shares.
J.P. Morgan Securities LLC served as financial advisor and Weil, Gotshal & Manges LLP served as legal counsel to Signet, and Meitar Liquornik Geva Leshem Tal served as legal counsel to R2Net on this transaction.
Photo: Oded Edelman, Co-Founder & CEO of R2Net. (Credit: Calcalist/Zvika Tishler)