Jewelry Company Blue Nile to Go Public in Latest Deal

Online fine jewelry company Blue Nile, Inc. is set to go public in a deal with special purpose acquisition company Mudrick Capital Acquisition Corporation II (Nasdaq: MUDS) in a move aimed at helping to expand its market share.

According to the June 10 deal, the pro forma enterprise value of Blue Nile is $683 million. It will generate around $450 million of capital before expenses, including $50 million of new preferred funding from Mudrick and $80 million in committed PIPE funding of which $50 million has been pre-funded.

Additionally, according to the filings, current Blue Nile shareholders will roll over their existing equity and retain 39% of the combined company’s pro forma equity. The implied pro forma equity value of the combined company is $873 million at $10.15 per share (the PIPE price)

Founded in 1999, Blue Nile has purportedly changed the way consumers can shop for “GIA graded, conflict-free diamonds, diamond engagement rings and fine jewelry” via its e-commerce platform, which has disrupted the jewelry market, according to the filings. As a result, Blue Nile is the fine jewelry e-commerce leader. The filings state that Blue Nile also provides customers with savings as its jewelry tends to cost customers “25-50% less than that of traditional brick-and-mortar jewelers.”

“As the pioneer of and category leader in online fine jewelry, Blue Nile is well positioned to win as the go-to e-commerce destination in the space,” Jason Mudrick, Founder and Chief Investment Officer of Mudrick Capital Management, L.P. said in a press release. “With its market leadership, track record as an innovator, talented team, and omnichannel business model, along with its proven growth vectors, Blue Nile fully addresses Mudrick Capital Acquisition Corporation II’s investment criteria. We are excited to partner with Blue Nile as it continues to be a trailblazer in the space.”

The filing notes that the new combined company will be led by Blue Nile’s current CEO Sean Kell as well as its current management team. Under Kell, the company has transitioned beyond being a leading online diamond engagement ring retailer to a fine jewelry marketplace.

“Over the past two and a half years we have successfully transformed and elevated Blue Nile as a thriving fine jewelry and lifestyle brand, and we are excited about the growth opportunities that lie ahead,” Kell said in a press release. “We have only scratched the surface of an estimated $320 billion global fine jewelry market that has been slow to move online and remains fragmented. As we look to execute our growth strategy, now is the right time to become a public company.”

Blue Nile is purportedly set to grow because it is in a good position to “capitalize on the fragmented and growing $320 billion global fine jewelry market”; it also has strong customer value proposition and repeat business; its omnichannel business model provides a competitive advantage; it has good customer service partly because of its data and technology; and its strong leadership.

The deal also has a no-shop provision. The combined company will be called Blue Nile and it will likely be listed on Nasdaq; however, the Nasdaq listing symbol was not disclosed.

The reverse triangular merger is expected to close in early Q4 2022. It has already been approved by each company’s Board of Directors and is subject to customary closing conditions and regulatory approval.  

Blue Nile is represented by Weil, Gotshal & Manges LLP. Mudrick Capital’s legal counsel is Kirkland & Ellis LLP and its financial advisor is Jefferies LLC.