The failure to complete the deal, announced after the market closed last night, is a big blow for the debt-laden group that had hoped to almost wipe out its pounds 306m borrowings through the sale.
Disagreement is understood to have centred on the leases attached to the 600 jewellery shops involved in the proposed pounds 280m deal. It is thought Apax was not prepared to offer terms that would have satisfactorily cleared Signet of any future liability on the leases. In a statement, James McAdam, chairman, said: "Negotiations have now ended. The group will now re-examine all options to address its gearing and capital structure."
Attention was focused on the problem of continuing responsibility for leases, a complex area of British property law known as privity of contract, earlier this year when Sears had several shoe shops returned to it after the collapse of Facia, the retailer to which it had assigned the leases. Sears had to close many shops with a heavy loss of jobs.
Privity of contract is understood to have been the stumbling block for the talks between Signet and Apax. An arcane but important aspect of property law, it means that, on all property leases signed before the beginning of this year, the original lessee carries responsibility for their terms even if they subsequently assign the lease to another party.
Since the beginning of this year a change in the law means that tenants can assign leases and, with certain conditions, draw a line under their exposure to their terms. The leases under negotiation in this case, however, preceded the law change and Signet could potentially have been liable for the contracts for their full duration, a risk it was not prepared to take.
Now it is resigned to keeping the two businesses, Signet attempted to focus attention last night on the improved trading performance of H Samuel and Ernest Jones announced earlier this week. The UK operations returned their first operating profit at the interim stage for six years with a pounds 200,000 profit compared to last year's pounds 7.9m loss. In the first six months, like for like sales were up 3 per cent at H Samuel and 18 per cent at Ernest Jones.Reuse content