UPDATE 1-Signet to buy rival jeweler Zale
* Signet offers $21 per Zale share, premium of about 41 pct to Tuesday close
* Signet shares rise 10 pct premarket
Feb 19 (Reuters) - Kay Jewelers parent Signet Jewelers Ltd agreed to buy smaller rival Zale Corp for about $690 million, cementing its position as the largest North American jewelry chain.
Signet's shares rose 10 percent to $87.00 before the bell.
The offer of $21 per share represents a premium of about 41 percent to Zale's close on the New York Stock Exchange on Tuesday. The stock traded as low as $3.76 in April.
The combined company will have around 3,600 stores in North America and Britain.
Including debt, the all-cash deal values Zale at about $1.4 billion, the companies said.
Zale has six retail brands, including Zale's and Peoples, and operates around 1,700 stores in North America.
Zale appointed Terry Burman, former chief executive of Signet, as its chairman in May.
Signet said it had the support of Golden Gate Capital, which owns about 22 percent of Zale.
Signet said it expected the deal to add to earnings by a high single-digit percentage, excluding acquisition costs, in the first year after close.
Signet said it expected to finance the transaction through bank debt, other debt financing and converting a significant portion of its accounts receivables into cash.
The company said J.P. Morgan Chase Bank has committed to provide bridge financing for the transaction.
J.P. Morgan Securities acted as financial adviser to Signet, while Weil, Gotshal & Manges acted as legal counsel.
BofA Merrill Lynch acted as financial adviser and Cravath, Swaine & Moore acted as legal counsel to Zale.