2 minute read
9 Apr 2014
11:59 am

Australia’s David Jones stores welcomes $2bn Woolworths bid

David Jones announced Wednesday it intends to recommend a takeover offer from South African retailer Woolworths that values the Australian department store operator at about $2 billion.

David Jones announces that it intends to recommend a takeover offer from Woolworths that values the department store operator at $2 billion

The upmarket chain, which had been discussing a merger with local rival Myer, said its board would unanimously recommend the Aus$4.00 per share cash offer, a more than 25 percent premium to Tuesday’s closing price.

The firm’s share price surged 22.6 percent, or 72 cents, to Aus$3.91 Wednesday as the broader Sydney index jumped to its highest level since June 2008. Myer rose 3.9 percent, or nine cents, to Aus$2.39.

“This is a compelling proposal which represents a significant premium to not only our intrinsic value but also to broker valuations and to recent share prices,” chairman Gordon Cairns said.

Woolworths said the Aus$2.1 billion (US$1.96 billion) deal would allow it to become one of the 10 largest department store operators in the world.

“This transaction provides us with the scale and opportunity to deliver significant benefits to our shareholders, and our customers in South Africa and Australia,” Woolworths chief executive Ian Moir said.

IG Market Strategist Evan Lucas said the offer was good news for both David Jones shareholders, given its poor performance in recent years, and Myer shareholders who have avoided what many feared would be a bad deal with its domestic rival.

“Ian Moir knows the Australian retail landscape a lot better than many people realise and there are certainly several things that can be done to improve the bottom line,” Lucas said.

The offer from Woolworths, which is unrelated to the Australian supermarket chain of the same name, will go to a shareholder vote and needs 75 percent approval.

Australian Treasurer Joe Hockey will also have to review it, as will the South African Reserve Bank.

Cairns said the board considered a number of options including a merger-of-equals proposal from Myer.

“The board has unanimously concluded that the Woolworths offer is a compelling option,” Cairns said in a statement. “It represents a substantial earnings multiple.”

AFP