Woolworths has offered to buy the 12 per cent stake in Australian fashion retailer Country Road that it does not own from retail billionaire Solomon Lew, in a bid to stop him opposing its much larger A$2.2bn (US$2bn) planned takeover of David Jones.
The South African retailer, which is not related to the Australian supermarket of the same name, on Tuesday offered A$17 a share for Mr Lew’s stake in Country Road.
The move could end a stand off over the future of department store operator David Jones, which started last week when Mr Lew revealed he had amassed an almost 10 per cent stake in the company that could enable him to disrupt the deal.
“In light of the proposed acquisition of David Jones, this is a common sense and timely opportunity to seek to reach full ownership of Country Road,” said Ian Moir, chief executive of Woolworths. A successful offer would allow Woolworths to delist Country Road and fully integrate the business, he added.
The board of David Jones recommended Woolworths’ A$4-a-share offer to its shareholders in April following months of courting by its Australian department store rival Myer.
The deal would create one of the largest retailers in the southern hemisphere and enable Woolworths to expand beyond a South African market that is struggling with lacklustre growth.
But the emergence of Mr Lew on David Jones’ share register last week put the transaction in doubt ahead of a planned vote by shareholders in the department store on June 30. The veteran retailer has a history of complicating Woolworths’ efforts to expand into Australia. In the late 1990s he bought a 12 per cent stake in Country Road, blocking Woolworths from taking full control of the fashion retailer.
Local media have speculated that Mr Lew may control more than the 9.89 per cent shares in David Jones he disclosed to the stock exchange, via undisclosed derivative swap contracts with Deutsche Bank.
“Mr Lew is a retail guru in Australia,” said Tim Jones, an analyst at Morningstar. “This is how he tends to operate: by taking blocking stakes in companies and forcing an acquirer to overpay for assets.”
In 2007 Mr Lew made a A$20m profit when he sold a blocking minority stake in Australian retailer Colorado Group to Affinity Equity Partners.
Woolworths’ offer price of A$17 a share for Mr Lew’s Country Road stake represents a 21.4 per cent premium to Monday’s closing price and values the outstanding shares at A$213m. Shares in Country Road have tripled from just under A$5 at the start of the year to A$15 in April. The offer price would net Mr Lew a total of A$213m and give him a significant profit on the investment he made in 1997.
Country Road’s thinly traded shares were up 14.3 per cent at A$16 midday Tuesday in Sydney, while David Jones was up 4 per cent. The benchmark S&P/ASX 200 was off 0.4 per cent.
Mr Lew is Australia’s 21st richest person with a A$1.7bn fortune, according to BRW magazine. He controls Premier Investments, a retail group that owns fashion brands including Just Jeans and Portmans.
David Jones said that it noted the announcement by Woolworths, which does affect the timing of its planned shareholding meeting to vote on the takeover. Last week David Jones postponed the meeting until July 14. – Financial Times
Source : http://www.ft.com/intl/cms/s/0/15f9e3ca-fb3e-11e3-a9cd-00144feab7de.html#axzz35RMWRJsc