Online diamond jeweler Blue Nile has agreed to be acquired by an investor group that includes Bain Capital Private Equity and Bow Street LLC for about $500 million in cash, or $40.75 per share, an offer that’s a third higher than its Friday closing price, according to a company statement released Monday.
The deal has no financial condition and will close in the first quarter of 2017, after which the retailer will become a private company. BofA Merrill Lynch is Blue Nile’s exclusive financial advisor, and Wilson Sonsini Goodrich & Rosati is its legal advisor. Goldman Sachs & Co is providing debt for the transaction, and Kirkland & Ellis LLP is serving as legal advisor to the investor group.
Under the terms of the merger agreement, Blue Nile may solicit alternative acquisition proposals from third parties during a 30-day "go-shop" period, following the date of execution of the merger agreement.
Seattle-based Blue Nile, founded in 1999, has become the largest online seller of engagement rings, wedding rings and fine jewelry, disrupting the space in the traditional way e-commerce merchants do — by undercutting rivals on price. The retailer has since begun to open physical stores.
Despite its success in the market, the company’s fortunes have fallen of late. The retailer also announced third quarter earnings, showing U.S. engagement net sales decreased 8.5% to $59.5 million, compared to $65.0 million for the third quarter in 2015. Q3 international net sales were $20.3 million, compared to $19.9 million for the third quarter in 2015, an increase of 1.8%. Excluding the impact from changes in foreign exchange rates, international net sales in the quarter increased 4.2%.
While the jeweler attracts consumers on a budget, it has garnered criticism for not showing the actual diamonds people are buying on its website. That gives it a disadvantage against Costco, another seller of diamond jewelry and engagement rings at prices below those found at local jewelers or at upscale jewelers like Tiffany.
Going private would allow Blue Nile to fashion a turnaround away from the glare of Wall Street. The company canceled its conference call with analysts in light of the acquisition announcement, which shareholders unanimously approved. "This is an opportunity to acquire a true disruptor in a fundamentally attractive and growing segment of the diamond industry," Ryan Cotton, a managing director at Bain Capital Private Equity, said in a statement. "[W]e believe the company will continue to grow as educated consumers continue to seek easy and convenient shopping experiences that deliver transparent pricing and enhanced value."